When do I need an insolvency practitioner?
Many people mistakenly assume that an insolvency practitioner’s (IP) role is designed to come into practice when a company has become insolvent, and while this is true to an extent, it isn’t the rule. The question ‘do I need an insolvency practitioner?’ should cross your mind as soon as you foresee any signs of financial difficulty.
Signs of deterioration
As a director, you must be aware of your company’s financial position at all times and watch out for signs of deterioration. Common warning signs of a struggling (or soon-to-be struggling) business include, but are not limited to:
- Lack of finance to support your company’s growth strategy.
- Cashflow problems.
- Falling profits.
- Accrued debts with HMRC.
- Inability to pay liabilities when they fall due.
Act fast
Detecting issues early can open up a range of avenues available to you. These might not be available to you further down the line. Nipping a potentially disastrous situation in the bud can mean you have access to a range of procedures, such as commercial financing, payment arrangements, or restructuring solutions. We outline options based on an assessment of your business and preferences.
What does an insolvency practitioner do?
Insolvency practitioners or IPs, are licensed to carry out tasks relating to insolvent companies and individuals. They can also deal with personal bankruptcy, perform administration and liquidation duties for businesses, and supervise through the process.
IPs must have a licence to practice and must comply with the regulations laid down in the Insolvency Act 1986.
While IPs deal with sole-traders and partnerships, much of their work involves dealing with limited companies.
Once you appoint an IP, their role will be dependent on the circumstances of the company in question. IPs can negotiate with, and report to creditors, carry out statutory duties and offer advice.
Is your company solvent or insolvent?
If you’re experiencing financial difficulties and you think your company may be insolvent, speak to us as soon as possible. By speaking to one of our advisors, we can help you determine whether your company is at risk of, or is actually insolvent.
If your company becomes insolvent
When a company becomes insolvent, it cannot afford to pay its debts, and won’t be able to in the foreseeable future. Creditors may force the company into liquidation; assets may be seized and sold off, and the company closed. Company directors are obliged to make the necessary preparations and act appropriately. If you’re worried your company will fall into insolvency, we’d advise you to act straight away. Get in touch with us, and we can provide you with free advice and work with you to decide what to do next to address your financial issues.
My business isn’t insolvent. Do I still need an insolvency practitioner?
Although IPs specialise in companies already in insolvency, if your company is experiencing financial issues or is anticipating any, it would be advisable to contact an IP to take appropriate action as quickly as possible.
Even if your company is not insolvent, getting advice from an IP won’t discredit your company, harm your credit rating or influence any creditors. If you’re experiencing financial difficulties, contact us now for free, confidential advice.
Is an insolvency practitioner the same as a liquidator?
An IP can act as a company’s liquidator, but can also take on other appointments including a company’s administrator or act as a supervisor in a voluntary arrangement.
While IPs can be assigned to liquidate a company if necessary, their role is more expansive than just carrying out liquidation and bringing a company to a close. Before liquidation, an IP can advise company directors on potential solutions to salvage the business. If it is decided that liquidation is the only option, they can act as the liquidator.
Does insolvency mean the end of my company?
Insolvency doesn’t always lead to liquidation. Depending on the severity and circumstances of the financial problems, it may be possible for a company to continue trading after a period of insolvency. Generally, the earlier you choose to act, the better the chances of your company surviving, and more options will be available to resolve the matter.
An IP may be able to agree on a company rescue plan. These could include negotiating a Company Voluntary Agreement (CVA) or, if necessary, put the company into administration.
I’ve received a winding-up petition. What can an insolvency practitioner do?
If your company is issued with a winding-up petition (WUP), contact us immediately. We can review the available options and advise you.
Depending on the company’s circumstances, an IP can possibly offer solutions such as a CVA, Creditors Voluntary Liquidation (CVL), administration, or pre-pack administration.
What to be careful of
When undergoing insolvency procedures, it can be easy for the uninitiated to fall for advice from unlicensed firms.
Avoid wrongful trading
Wrongful trading exists when you, as director, allow a company to continue trading while insolvent, thus worsening your creditor’s position. Your company would be taking on more debts and credit that it likely won’t be able to pay back. It can result in you as the director, being held personally liable for company debt. It can even lead to prosecution in some cases.
Acting as soon as you’re aware that the company is in difficulty means you aren’t risking these possible wrongful trading accusations.
Beware of ‘introducers’ and middlemen
There are middlemen out there who act as ‘introducers’, putting you in touch with an insolvency practitioner and charging you for their trouble. Do your research and ensure you’re directly in touch with an authorised insolvency practice. It will save you money, time and hassle. Only licensed IPs, such as ourselves, are authorised to conduct legal insolvency proceedings.
Free consultation & advice
All our initial advice and assessment is completely free and without obligation. It is better to check up on your business’s health rather than turning a blind eye until issues escalate.
By this point, your available options may be greatly reduced. Contact us with any worries you have, for free, regulated, professional advice.
In summary
Be vigilant as a director to spot problems, and act swiftly to prevent issues from spiralling. If you let it deteriorate, your ability to turn the company around becomes restricted, and you risk personal liability. The earlier you act, the more we can potentially do to help.
IPs will attempt to keep the company operating and stop it from becoming insolvent.
While insolvency doesn’t always mean the end of your company, if you’re experiencing financial problems, or you’re worried it’s heading for insolvency, you should contact us as soon as possible. Be aware that the insolvency industry is heavily regulated. Not doing your research and going through an ‘introducer’ can cost you much more in the long run.
How we can help
We have a team of licensed insolvency practitioners, and we operate across the UK. We can assess your business and identify any issues, construct a plan for survival and guide you through to recovery or restructure. All while bearing the brunt of stressful creditor pressure.
As licensed insolvency practitioners, you can trust that our advice is authorised and always in the best interests of your company and its creditors. Our empathetic team of consultants are on hand to provide you with free initial advice, completely without obligation.
If you have any questions or are unsure whether you need an insolvency practitioner, call us and have a free chat with one of our advisors.
Case Studies
JS Security
Kelly Burton • Other • Administration
All 42 jobs have been saved at a Cheltenham security firm after it was bought out of administration.
Joint administrators Kelly Burton and Lisa Hogg of insolvency and business turnaround specialist Wilson Field were appointed to JS Security on 10 February after HMRC threatened to wind-up the company because of accumulated tax arrears.
The company, which operated from Old Station Drive in Cheltenham, has now been bought out of administration by existing, and associated company, JS Facilities Group Limited of Cheltenham, saving all 42 jobs.
The business will be operated by the existing management team lead by managing director John Search. The total value of the deal is undisclosed but it includes the business and the assets of the Cheltenham based company.
Kelly Burton, director and insolvency practitioner at Wilson Field, which has bases in Leeds and Sheffield, said;
“Unfortunately, the security services sector is very competitive which leads to hourly rate discounting and small margins.
“JS Security accumulated tax arrears which threatened its existence. After discussing the situation with the director, I am pleased that we have found a solution which will see the business continue to trade and also all 42 employees’ jobs transferred to the new company.”
JS Security was appointed the official security provider at Gloucester Rugby in June 2013 for two-years and also won the contract to provide matchday security for the four Rugby World Cup matches at Kingsholm Stadium in September 2015.
The contracts covered match day security, including the hospitality areas, car park security and any additional security requirements.
JS Facilities Group Limited has been running for 15 years and operates throughout Gloucestershire specialising in security services for sectors including commercial, logistics security, construction, events, key holding and alarm response.
Services include remote video monitoring, control room services, lone working monitoring, security guarding, door supervisors, mobile security patrols, event security and first aid training.
Oldham Precision
Kelly Burton • Construction & Engineering • Administration
Machining engineers Oldham Precision has been bought out of administration saving all 12 jobs.
The company’s principal activity was the sub-contracting manufacture of large volume batch precision machined components for clients across a wide range of industries including aerospace, paper converting, printing, coatings, electronics and valve construction.
Administrators Kelly Burton and Lisa Hogg from Sheffield business turnaround experts Wilson Field were appointed joint administrators on 17 January after the company suffered cash flow problems.
Originally established in 1982, the company, based at Red Rose Business Park on Shaw Rd in Royton, offered subcontract engineering including CNC milling, grinding and turning.
After advice from Wilson Field, the business was sold to the existing management team as a going concern saving all 12 employees’ jobs.
Kelly Burton, director in the Leeds office at Wilson Field said;
“Following discussions with the director, the business was sold as a going concern, safeguarding all 12 employees’ jobs and offering a better return for the company’s creditors than alternative options.
“The new company will be under the same management offering the same standards of service to its customers.”
ARB (Sound Vision Light Power) Limited
Kelly Burton • Leisure & Hospitality • Administration
Wilson Field has secured a new future for a Banbury headquartered events management company, which boasted clients including Crufts, Tour of Britain and Virgin London Marathon after it was bought out of administration.
ARB (Sound Vision Light Power) Limited was established in September 2014 and specialised in event hire including providing audio visual solutions equipment, hire and installation.
The company, which traded from Coton Cottage, Chacombe near Banbury, called in administrators from Sheffield-headquartered Wilson Field for formal insolvency advice.
The company, which has an impressive client list and relied solely on sub-contractors as and when needed, suffered VAT and HMRC issues as a result of a period of illness.
Kelly Burton and Lisa Hogg from Wilson Field were appointed as joint administrators on February 20 and concluded a pre-packaged sale of the business and assets for an undisclosed sum to ARB Motors Limited, lead by the same management team.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said:
Wilson Field was brought in to look at the situation of the business.
The focus on the company had diluted during a period of illness of one of the two directors. A debt was due to HMRC and a repayment proposal was rejected resulting in the need to protect the business and assets via a formal insolvency procedure.
The pre-packaged sale means the business, which was an established player in event management at large scale events, has a bright future moving forward.
The loss of a major employee’s input through illness can harm an organisation and it is important for businesses to seek help should this arise. Timing is essential to keep focus on the business.
ARB has combined experience of more than 100 years and provided hire equipment such as indoor and outdoor PA systems, single and double-decker commentary units, street sound vehicles, exhibition TVs, stage lighting and mobile power in both primary and secondary distribution.
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