The insolvency legislation provides four different regimes for companies facing insolvency or financial difficulties:
|A Company Voluntary Arrangement is an insolvency procedure that allows a financially troubled company to reach a binding agreement with its creditors about payment of all, or part of, its debts over an agreed period of time.|
Company administration is directed at rescuing companies as going concerns. Administration can, since the Enterprise Act 2002, be commenced without a court hearing, although a number of formalities must be adhered to and the option of a court hearing still remains. An administrator can be appointed by the company or its directors, the holder of a floating charge or by an administration order of the court.
|A receiver is appointed by a lender holding a charge over some or all of the company's assets. The main responsibilities of a receiver are to ensure the appointing lender is paid off. The law recognises that the receiver's control over the company can have considerable effect on the company and its other creditors.|
|It is important to recognise that not all liquidations are insolvent liquidations. There are many differences between these procedures however they are both designed to achieve the same end result; to collect and distribute the assets of the company. When liquidation comes to an end the company may be dissolved and will no longer exist as a commercial entity.|
The laws relating to these procedures are principally contained in the Insolvency Act 1986 ("the 1986 Act") and the Insolvency (Scotland) Rules 1986 ("the 1986 Rules").