What are the risks of unregulated insolvency advice?
Unlicensed and unregulated insolvency advisers aren’t bound by the same professional regulatory standards as licensed and regulated insolvency practitioners (IPs). While they may make promises and offer solutions that licensed and regulated IPs can’t or won’t, this lack of regulation can lead to issues further down the line.
Because these advisers aren’t bound by the insolvency rules and regulations, it could lead to:
- Poor quality of service
- Hidden costs (like a referral fee)
- An inexperienced adviser dealing with your case
- Potential future liabilities due to a lack of due diligence and adherence to compliance
- Use of unregulated insolvency avoidance schemes
For professional advice from licensed and regulated IPs, speak to us. We can offer free, impartial, confidential advice on the appropriate solutions and a no-obligation consultation.
What does unlicensed advice look like?
As well as operating without the required licenses and regulations, unregulated insolvency advisers may:
- Look cheaper up-front
Unlicensed advisers may appear cheaper, but many could be lead generators. They charge a referral fee before passing you to a licensed IP, making the process more expensive than if you had gone directly to a licensed IP in the first place. - Make big promises with unrealising outcomes
An unlicensed adviser could claim to have access to additional services with a more appealing-sounding outcome. For example, they could offer to purchase your company for a nominal fee and promise they can make all its debts go away. - Require an initial fee before any advice is given
Unlicensed advisers may charge fees for initial advice or for appointments before beginning the process. By contrast, we offer free initial advice and a no-obligation consultation before any payment is required. - Lack transparency
The adviser may provide vague information around the specific process they’ll use to close or rescue the company, the associated fees, or how they’ll handle circumstances specific to your company (such as Directors Loan Accounts).
Can my accountant give me advice?
Your accountant can provide general advice on your company’s position, including cash flow and next steps, but they are not licensed to provide insolvency advice. They may recommend a licensed Insolvency Practitioner (IP). Unless they personally hold an IP licence, they’re not authorised to take a formal appointment.
More on your accountant’s role in closing your companyWhy do I need to speak to a licensed and regulated insolvency practitioner?
Only licensed and regulated IPs can carry out the formal insolvency procedures needed to close or rescue a company.
By speaking to us, you’ll receive free, impartial, confidential, non-obligatory advice you can trust. As licensed insolvency practitioners, we can ensure:
- Bespoke actionable advice
You’ll receive advice appropriate to your company’s situation and open and transparent answers to your questions, giving you a clear understanding of the potential solutions available and the stages of the process best for you. - Transparent fees
Any costs are outlined transparently, with no additional referral fees. - Regulated process
Any insolvency process undertaken is carried out within the law and any regulatory requirements. We will ensure that your position as director is clear, helping you avoid future personal liability and risks.
As the company’s director, you should always be aware of your company’s solvent position and whether it is insolvent. As soon as you’re aware that the company is experiencing financial difficulties, you should act in the company’s and creditors’ best interests and contact a licensed and regulated IP.
More on speaking to a licensed and regulated insolvency practitionerHow do I know I’m speaking to a licensed insolvency practitioner?
All IPs are licensed and regulated by regulatory bodies. Our IPs are licensed by the Institute of Chartered Accountants in England and Wales (ICAEW). This means they are licensed to provide advice, undertake insolvency appointments, and comply with the relevant insolvency rules throughout their work.
View our licensesHow our services can help your company
If your company is struggling to repay its debts as and when they fall due, speak to us. We can provide free, impartial, confidential advice with no obligation. Our licensed and regulated IPs can carry out the following formal insolvency procedures:
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
- Restructure your company through administration
Administration is an insolvency procedure for companies. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
- Close your company down via a Creditors Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
How to get in touch with us: The next steps
- Speak with our initial advisers
Make contact with our team via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems. - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
Unregulated insolvency advisers can seem like an appealing alternative to licensed and regulated IPs and may claim that they could offer a wider variety of processes.
However, this lack of licensing and regulation means you could be speaking to an unlicensed adviser who can’t make a formal appointment and may be offering an insolvency avoidance scheme. Those who offer these services may not perform their duties to the same level of due diligence as licensed and regulated IPs, which could potentially lead to further issues.
Speak to us for free, impartial, confidential advice, and a no-obligation quote. All our IPs are licensed and regulated by the ICAEW and will work to find the best solution for your company.
Case Studies
M J Squire Limited
Kelly Burton • Construction & Engineering • Creditors Voluntary Liquidation (CVL)
A bespoke joiners and shop fitters in Sheffield, M J Squire Limited, had been in its trade for more than 30 years.
However, recently it has been forced to close due to the downturn in the construction and retail industry.
The company was located at Orgeave Close in Sheffield, after working for many household names over the years including House of Fraser, Levi’s, Austin Reed and Tommy Hilfiger.
Until 2014, it had been a profitable company but over the past couple of years, it had been unable to secure profitable contracts.
February 10th, 2016 saw the appointment of Wilson Field’s Andy Wood and Robert Dymond as liquidators. This development for the company came as a result of suffering cash flow problems.
Operations at M J Squire Limited have now ceased and regrettably, all nine roles within the company were made redundant.
Andy Wood, insolvency practitioner from Wilson Field, spoke about his work on this case.
“Declining sales at M J Squires significantly impacted cash flow and the business’ ability to meet its liabilities. In the face of tough market conditions, the director has taken the difficult decision not to continue trading. The business has closed and the assets are being sold.”
“It is very sad to see this well-known local business cease to trade after over 30 years. The downturn in the retail sector has hit this business hard.”
Derwent Castings Limited
Kelly Burton • Metals • Creditors Voluntary Liquidation (CVL)
Unsecured creditors owed money by a Derbyshire manufacturing company which went into liquidation are to receive a higher than the expected dividend of 60p in the pound.
A total in excess of £128,000 is due to be distributed to unsecured creditors of Whatstandwell-based Derwent Castings Limited, whose claims totalled over £192,000.
The company, whose roots date back to the 1940s, had traded profitably for a number of years but in late 2013 / early 2014 saw the cancellation of its largest sales contract which represented 70 per cent of its turnover.
Bosses at the company, which employed 16 staff including three directors, struggled to attract replacement business and had to drop prices. Further business was lost as a result of foreign competition.
Sheffield’s insolvency specialist Wilson Field was called in as liquidator and worked with the creditors’ committee of Derwent Castings Limited to secure the positive dividend.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Dividends for insolvent companies are generally low, or nothing, for a variety of reasons – cost of staff redundancies, difficulty collecting outstanding invoices, selling assets in a forced sale situation, selling specialist assets which have limited appeal to purchasers, deteriorating or perishable assets, as well as other costs involved.
“However, thanks to a very positive relationship with the creditors committee, I am delighted to return a healthy dividend to the unsecured creditors in the region of 60p in the pound.
“The supply chain is often greatly affected by a liquidation and in this case we have been able to help creditors.”
Derwent Castings Limited was incorporated in August 2002 and specialised in iron casting from the five-acre Derwent Foundry site at Whatstandwell near Matlock.
However, the iron founding operation at Derwent Foundry was first introduced back in 1946 by Wragg & Hawksley which produced cast iron pipes for the water industry.
In 1950 the foundry was acquired by WH Davis & Sons Ltd to supply castings for their railway wagon building business. Following a management buy out in 1984, the company was renamed Derwent Foundry Ltd and following its closure in July 2002, was bought by its present owners and renamed Derwent Castings Ltd.
Amongst jobs carried out on site were moulding using loose pattern and modern air setting (boxless) sand systems; metals work using the latest in electric induction melting producing a wide range of grey, SG and alloy irons; an independent Namas approved test laboratory, finishing, pattern making and machining facilities.
Statestrong Limited
Kelly Burton • Manufacturing • Administration, Creditors Voluntary Liquidation (CVL)
Insolvency experts Wilson Field has helped turnaround the fortunes of a loss-making manufacturing company in Lancashire providing a new future for its 80 employees.
Businessman Russell Blaikie acquired the struggling 40-year-old Statestrong Limited, headquartered in Lytham St Annes, through a pre-pack sale and has been able to help the company immediately utilising his expertise in manufacturing and management.
Arrangements for the purchase of Statestrong’s business and assets were negotiated by Sheffield business specialists Wilson Field who affected the sale shortly after being appointed.
The company, which manufactures and supplies aerosol and liquid products for use in health and beauty, household, automotive and industry globally, posted sales of £12m last financial year, but had suffered pressure from creditors with outstanding arrears.
The total value of the deal is undisclosed but includes the business and the assets of the company based on Boundary Road in Lytham St Annes and Tarporley in Cheshire, which will now trade as Statestrong Products Limited.
Mr Blaikie said:
“Transactions of this nature are sensitive and require careful handling. The team at Wilson Field provided exactly the right professional approach.”
Wilson Field’s insolvency practitioners Kelly Burton and Joanne Wright worked closely with Mr Blaikie along with senior corporate case administrator Gareth Kinneavy.
Kelly Burton, said:
“The company had a wealth of expertise but was straddled with financial liabilities which ultimately made its future questionable. Looking forward, a previously distressed business now has a viable future.”
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