Insolvency Practitioners help in Pandemic?

Blog / By John Waller

When operating in business in the UK directors often fail to understand how an Insolvency Practitioner help in the pandemic?

So once you have decided to approach one for help, Operators of businesses are sceptical about what support Ip’s offer. Insolvency Practitioners remains a not well-known profession. A stigma attaches to them of being a “grim reaper“. However, they are not in reality.

All is not lost when dealing with them. Indeed, it may help to save your business from closure.

Licensed Insolvency Practitioners primary aim remains to maintain were possible the business while rectifying financial issues attaching to the business.

  • Direct help may be dealing with the business creditors:
  • renegotiating terms of payment;
  • preparing voluntary agreements.

Procedures used may be:

Voluntary Arrangement payment plan to creditors

The appointed insolvency practitioner can establish a monthly payment plan. Generally on a formal footing for those who are sole traders using an Individual Voluntary Arrangement (IVA). If a limited company then using a Company Voluntary Arrangement (CVA). Upon approval, the payments for creditors remain paid via the Supervisor at the agreed level in the scheme.

Duties of the insolvency practitioner include dealing with company creditors, preparing an IVA or CVA and securing 75% or more of their vote in favour of a proposal. Upon approval, the suggested repayment is legally binding by all parties. No further action by creditors is allowed. The appointed Supervisor now deals with all areas concerning the activities of the business.

IP’s remain appointed as nominee and Supervisor. However, they may guide but are not, therefore, responsible for preparing a viable proposal for the IVA or CVA. They assist with the preparation of the Statement of Affairs. (SOA), and inform the business creditors on how much they will be receiving through the agreement every month once agreed. The IP remains in the position of the Supervisor during the term of the IVA or CVA.

A CVA statement of affairs in corporate insolvency remains published at Companies House.

In UK personal insolvency, the statement of affairs remains given to the individual’s creditors and related stakeholders.

For further support on statement if affairs please read ‘What is a statement of affairs

Planning an IVA or CVA for the businesses creditors to approve using an insolvency practitioner diminishes business owners concerns while offering surety to the business creditors moving forward. The insolvency practitioner will then conduct an annual review to ensure that the payment plan is on track and the company is paying off its debts as agreed.

Insolvency Practitioners Help in Pandemic & ‘Statement Of Affairs’

As a guide, information required to prepare a Statement of Affairs includes:

  • A schedule of assets and liabilities held by an individual if IVA or the company, CVA;
  • a schedule, detailing details of the creditors along with amounts outstanding with preferably supporting proof of debt. (IVA and CVA arrangements);
  • any security provided, the value, when and why?

Note: Once the Statement Of Affairs is prepared. Then you are required to have a statement of truth to be attached. Failing to file for a company director may lead to potential financial penalties and even disqualification.

The to be appointed insolvency practitioner can hardly prepare a statement of affairs, based on inaccurate information provided by directors. So, it remains essential to be as accurate as feasible with the financial information you produce.

Members’ Voluntary Liquidation (MVL)

Limited solvent companies wishing to cease trading and close their company due to retirement or the business merging with another company appoint an insolvency practitioner to deal formerly with the companies affairs. Once the Liquidator holds office in an Members Voluntary Liquidation MVL, then control is handed to them. The Liquidator then places an advertisement in the gazette while ensuring all the companies creditors remain paid in full and payment of tax liabilities. 

Assets belonging to the company are independently valued and realised. The balance of the monies is then paid over to the shareholders once tax clearance agreed with the HMRC and ALL creditors satisfied. All matters require completion within one year, of the Liquidators appointment. Finally, all that remains is the removal of the company from the register at companies house. Then the company ceases to exist as a legal entity.

Appointed as liquidator or an Administrator

The procedure in the UK winding up a limited company requires the appointment s approved, of a licensed insolvency practitioner as Liquidator. The appointment applies to companies whether they are insolvent or insolvent. An essential component of an IP’s duty remains to secure the realisation of the companies assets in liquidation. Then, the funds realised remain available for distribution to the companies creditors in order of legal preference.

Often when proposing to liquidate with a solvent company, the directors will have made the necessary arrangements regarding assets and inventory before starting the liquidation process but will have taken the advice of an insolvency practitioner initially.

Once the appointment of an insolvency practitioner takes place as the administrator of the limited company, often the future viability consideration allows for a pre-pack administration sale, along with the sale of the company. Such a decision may offer the best outcome for the companies creditors in administration.

The purpose of a Licensed Insolvency Practitioner

Licensed insolvency practitioners remain approved to manage the company insolvency, administration and liquidation following the Insolvency Act 1986. They also advise struggling companies support, such as:

  • Preparing debtors and creditors of the company to approve a voluntary arrangement;
  • Once appointed, as the companies liquidator or administrator dealing with the company’s assets and other issues;
  • report to creditors in the financial status of the company and why it failed;
  • rescue the company and preserve jobs;
  • Manage legal claims.

An IP may not save every business from closure (Liquidation). However, an insolvency practitioner will strive to agree to repayment and maintain business trading. IP’s offer businesses experience at recognising operations of the failing business where changes remain feasible. And operating costs reduced to improve cash flow and profitability. Therefore, striving to turn the chances of the company around into profitability. They can help businesses deal with creditors before them taking any action against the company, such as forcing liquidation.

Support from a Licensed Insolvency Practitioner remains open to all businesses and individuals. However, if you have a limited company that is failing financially, then primarily as a company director act fast!

Financial issues of any sort may though expose company directors to personal liability if mismanaged.

Support may be with:

  1. Your business trading while remaining reliant on a large business overdraft:
  2. exploring further working capital funds:
  3. advising on issues with HMRC.

Insolvency Practitioners help in Pandemic using Business Rescue strategy

Rescue plans remain a particular area of expertise for insolvency practitioners. Business who struggle to keep operating, need to seek support fast and thus ensuring the ongoing viability.

Often a business may over time lose their direction, often associated with management changes, affecting performance and the companies reporting function. In any case, companies grow and lose financial control. If your business is experiencing similar issues, then meet with an insolvency practitioner. We at HBG Advisory strive to ensure your business may realise it’s true potential examining the company’s strengths, vulnerabilities, possibilities and warnings to produce a plan for the company and steer clear from failure and ultimately insolvency.

If your business is potentially failing, then contact HBG Advisory for a FREE Initial meeting. To make safe contact, please either:

  • Call us today on 0800 612 5448 for FREE Company Debt Solutions;
  • view HBG Advisory website;
  • Book a secure VIRTUAL meeting safe and private in the privacy of your home or workplace;
  • CONFIDENTIALITY ASSURED AT ALL TIMES.