Types of insolvency

Types of insolvency

Insolvency in the UK is:

•
governed by the Insolvency Act 1986 (IA 1986) and the Insolvency Rules 2016, SI 2016/1024
•
subject to the jurisdiction of the High Court and designated county courts

Companies in financial difficulty may be subject to the following insolvency procedures:

•
company voluntary arrangements (CVAs)
•
administration
•
liquidation/winding up (compulsory or voluntary)
•
receivership

Administration

Administration is the most common of the insolvency procedures. A company in administration still exists legally and can continue to trade. Administration is designed to rescue and restructure a company that has become insolvent.

An administrator may be appointed either:

•
out of court, by a qualifying floating charge holder or by the company or its directors, or
•
by the court, on application by the company, its directors or one or more of its creditors

The objective of administration is to:

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