Alternatives for insolvency.

A corporate entity under insolvency regime ideally means that it will be would up, dissolved and its daily operational activities brought to an end. Instead of bringing it to insolvency due to its liabilities, there exists several alternatives which can aid in restructuring the entity to enhance continuity with its operations.

Such alternatives enhance business rescue, rehabilitation, preserves employment, and maximizes returns to creditors. They include:-

1. Corporate Voluntary arrangements. Provided for under Sections 625-635 of the insolvency Act. It involves a proposal by the directors of a company, which is made to the creditors comprising of a mode of settling creditor’s liabilities on instalment terms. Directors of the company draft the proposal and appoint a supervisor who will administer the process. A creditors meeting is thereafter called whereby if the creditors by a majority vote approve the agreement, it becomes legally binding a shields the company from liquidation.
2. Administration. Provided for under Sections 524-557 of the Insolvency Act. It involves an independent, qualified insolvency practitioner called the Administrator taking control of a distressed company to rescue it as a going concern or achieve a better return for creditors other than liquidation.

The objectives of the administration of a company include:-

1. To maintain the company as a going concern.
2. To achieve a better outcome for the company's creditors as a whole than would likely to be the case if the company were liquidated (without first being under administration).
3. To realize the property of the company in order to make a distribution to one or more secured or preferential creditors.

The administrator ideally prepares rescue structures and plans, protects creditor’s interests, shields the company from liquidation or insolvency proceedings, recovers the company property and performs any other necessary task to rescue the company from collapsing.

At Siyasa and Company Advocates, we offer expertise and professional legal services to corporate entities who are enduring financial constraints objectively to assist them stabilize their financial status by advising them on several alternatives to insolvency proceedings. We have a seasoned, competent and esteemed team ready to serve you diligently. Conduct us for further advise.

Disclaimer: “This article is for informational purposes only and does not constitute legal advice. For inquiries, please contact Siyasa and Company Advocates.”

-Contributed by-

-Francis Kitheka-