Milestone CVL Dividend Secured – Andy Wood

The value insolvency practitioners (IPs) can bring to creditors of an insolvent company is often overlooked.

I have recently reviewed 120 cases where I have taken lead appointments over the last 2/3 years, and one of the common frustrations of being an insolvency practitioner is hearing from creditors the common retort; ‘I can’t see any reason to complete a proof of debt, as the assets always go on your fees and the creditors get nothing’.

£1.6 million returned to creditors in CVL over the course of three years.

Having been in my role at Wilson Field for almost three years, I thought it would be a good time to review if there is any truth behind those comments, based on my own caseload.

When a business becomes insolvent, a firm of insolvency practitioners, like Wilson Field, will be appointed to look after the affairs of the company and realise its remaining assets, with the primary objective of maximising returns to creditors.

Once a business is placed into formal insolvency, creditors cannot be fully repaid as liabilities exceed assets, meaning either a limited or no return to unsecured creditors. In many cases, the company ceases to trade with all jobs lost.

A common misconception is that insolvent businesses simply leave a trail of unpaid creditors struggling to make ends meet in the wake of a collapse, and although this can be the unfortunate outcome in some cases, it is generally not the full story.

As an IP, it is my responsibility to realise assets, and where possible pay a dividend to creditors. I must endeavour to obtain the best possible return for creditors, in terms of pence in the pound.

The majority of my work consists of corporate appointments and my caseload is split approximately 50:50 between insolvent and solvent work. In relation to my insolvent appointments, I have distributed to creditors just short of £800,000 over three years and would anticipate further distributions from this existing caseload during the next twelve months of a similar amount.

At £1.6m over approximately 60 appointments, that equates to an average distribution per case of in the region of £27,000. Of course, averages can be misleading, and two of these cases to date account for £250,000 and £125,000 each, whereas 20 cases had modest realisations resulting in no distribution to creditors. The good news is that distributions were made in more than 60 per cent of all insolvent cases.

The insolvency profession is much maligned and it is correct that in recent years, transparency to creditors has been key, but it is my opinion that we should be even more transparent as a profession and provide the above information on an annual basis to let creditors know that we are working hard to get them the best return in every single case.

A simple annual return, available as a public document, would remove the perception that all realisations go on insolvency fees. It would also allow interested parties to weigh up the benefits of instructing specific firms of IP’s depending on whether they have a track record of returning healthy dividends to creditors. If you have done a good job, why not let the business community know about it?

For more information, visit our dedicated creditor voluntary liquidations page.