1. How do I know if I am insolvent?
If you cannot pay your bills as and when they fall due or, if the value of your debts is more than the value of your assets, then you are insolvent.
2. What does insolvency mean?
If you are insolvent, it essentially means that you cannot pay your creditors on time and therefore leaves you vulnerable for the said creditors to issue proceedings against you for the recovery of their debts.
3. My business is struggling to make payments, does this mean I will go ‘bust’?
No! Just because a business is struggling, it does not mean that it needs to go ‘bust’. On the contrary the majority of businesses that experience financial difficulties and seek early advice do not go ‘bust’. With the appropriate advice, businesses find a way around the problem.
4. How can I protect my business from insolvency?
Subject to the extremities of the position, no company or business should go ‘bust’ providing it takes the appropriate advice at the appropriate time with the appropriate confidence. IRL believe that you should explore all of the avenues available to you before implementing an insolvency procedure.
5. I owe HMRC and I am unable to pay them now, what can I do?
HMRC, a landlord or indeed anybody that is owed money from a business that is under-performing should be treated with the utmost respect. In doing so, seeking early advice from a reputable Insolvency Practitioner should enable the team to negotiate a way around the predicament to enable the business to continue trading whilst it implements a repayment programme.
6. What is business rescue?
Business rescue is the term used to work with management to assist in the implementation of a turnaround of the business rather than that business failing.
7. How do I know if my business can be ‘rescued’?
IRL believe that management are the only real indicators of whether a business can be rescued and also believe that any business can be rescued if management are 100% behind the difficult task of turning around the under-performance. The only reason management need the assistance of people like IRL, is to assist them in the implementation of the rescue plan given the unsavoury attitude of creditors when the pressure is mounted.
8. What are my liabilities as a Director of an insolvent company?
In principal there are no liabilities associated with a Director of an insolvent company. However, insolvency and company law legislation dictates that as a Director of a Limited Company, your responsibilities to all stakeholders must be adhered to and if it is abused, then Directors ultimately should be accountable. It is imperative that any Director of an insolvent or under-performing business takes advice and IRL believe that the earlier you do so, the better the outcome.
9. What do I do if my partnership is insolvent?
Partnerships are a complex state of affairs given the structure of the same. Many partnerships are essentially a lot of individuals trading in their own names and others attract limited liability similar to that of a corporate entity. Irrespective of the status of the partnership, if it is under-performing or worse, insolvent, it is imperative that any partner, member or associate, take immediate advice in order to reduce, as far as possible, any personal exposure to financial ruin.
10. What happens to my personal guarantee when my business goes ‘bust’?
Put in simple terms, if a business goes ‘bust’ and you have personally guaranteed a debt, for example to a bank, then you are responsible for the debt. However, the debt is normally subject to an asset, for example property, debtors, intellectual property, stock etc. and subject to the realisable value of the asset, will depend on the exposure of your personal guarantee. We would strongly suggest that anybody who has provided a personal guarantee, in a situation where their business is struggling, seeks immediate advice given the ramifications of the crystalisation of that guarantee. It is worth noting that full exposure to a personal guarantee can result in the personal bankruptcy of the provider.
11. Who can start insolvency proceedings?
In reality anybody who is owed money can initiate insolvency proceedings. However, if it is in the public interest, the government can also do so. In practice, the majority of insolvency proceedings are initiated by business owners who recognise that by doing so, they are protecting the position for those that are owed money rather than abusing their positions.