Unlicensed Insolvency Practitioners Wound Up by Insolvency Service. Why You Should Always Speak to a Licensed and Regulated IP.
In July 2024, the Insolvency Service wound up and closed a company acting as an unlicensed insolvency practitioner.
The Manchester-based firm advertised insolvency practitioner services, turnaround services, and corporate restructuring whilst lacking a single insolvency practitioner acting for them.
Unlicensed advisors have no legal authority to carry out insolvency or restructuring proceedings.
While insolvency can be a daunting prospect for company directors, you must take advice from a licensed and regulated insolvency practitioner (IP) before committing to any business turnaround procedure.
Firm wound up “in public interest”
The firm in question advertised alternative solutions to formal insolvency proceedings.
Despite claiming to have experience in corporate restructuring and insolvency, the company was not licensed to do so. The Insolvency Service argued that offering these services without the appropriate licenses risked compromising the insolvency industry’s integrity.
Following an investigation, which the directors failed to cooperate with, the Official Receiver wound up the company in what it called “public interest”.
“Alternative to formal corporate insolvency”
The wound-up firm also advertised “a unique alternative to formal corporate insolvency”. They offered to sell companies within 48 hours for a single payment and for directors to leave their debts behind. They also advertised debt restructuring, crisis management, and negotiations with creditors. However, the company did not indicate what would happen after the sale, how it would deal with company liabilities, or how it would negate the ex-company directors’ liabilities and accountability, such as personal guarantees or overdrawn directors loan accounts.
Unlike a formal insolvency process, these aren’t regulated, and there is little evidence that it would draw a line under the company’s debts without it being formally liquidated.
Why you should speak to a licensed and regulated IP
By speaking to a licensed and regulated insolvency practitioner, you know that the formal insolvency procedures they carry out must follow the regulations set out in the Insolvency Act 1986, and the Insolvency Rules 1986. The formal legal proceedings and outcomes within these processes are something which an unregulated IP would not be able to achieve.
If your company’s financial situation is deteriorating and it risks falling into insolvency, speaking to a firm of licensed and regulated insolvency practitioners is the best way forward. The sooner you act, the more options you’ll have open, and the better your chances of achieving your desired outcome.
An insolvency practitioner’s duties are many and varied and depend on the process the company enters.
When you might need an insolvency practitioner
How our licensed insolvency practitioners could help your company
If you’re a company director and your company is struggling to repay its bills on time, make sure you take advice from a firm of licensed and regulated insolvency practitioners.
Speak to our initial advisers for free, impartial, confidential advice with no obligation. We can arrange a free consultation and guide you towards the solution best for your company.
That solution could be one of the following:
- Formal repayment plan for company debts
If your company is struggling with burdensome debts but has an otherwise viable business model, the company could apply for a Company Voluntary Arrangement (CVA). These formal repayment arrangements allow insolvent companies to repay their unsecured debts in monthly instalments at a tailored, affordable rate. They enable the company to continue trading while repaying and will pause creditor pressure for the duration of the arrangement.
More on Company Voluntary Arrangements (CVAs) - Restructuring the company through administration
If more substantial restructuring could return your company to a profitable state, we may recommend administration. Here, the IP will assess the company and decide which parts can be restructured to a profitable state, with the rest sold off.
More on company administration - Closing the company through liquidation
If the company’s debts are of such a level that recovery isn’t feasible, closing the company in an orderly manner might be the best option. In this case, the company can close through a Creditors Voluntary Liquidation (CVL). This process draws a line under the company’s debt, ending its operations. Doing so may generate a better return to creditors than if they were to wind the company up through compulsory liquidation.
More on Creditors Voluntary Liquidation (CVL)
Summary
Following an investigation, The Insolvency Service wound up a company offering insolvency and restructuring solutions, whilst lacking the licenses and regulations required for an insolvency practitioner. The company wasn’t clear on how it would carry out these procedures, nor was it clear on its advertised ‘alternatives to insolvency’. The Insolvency Service argued that the company risked compromising the insolvency industry’s integrity and wound it up citing “public interest”.
If your company is struggling financially or cannot repay its liabilities as they fall due, you should discuss your options with an insolvency practitioner. These licensed and regulated professionals can assess your company’s circumstances and guide you towards the most suitable solution for its issues. This could include repaying the debts in affordable monthly instalments, restructuring the company back to a profitable state, or closing the company down in an orderly manner.