Not sure where to turn or who to ask? Are creditors chasing you for payment? Asking yourself ‘How do I find my way out of this?’ Listed below are some questions we are regularly asked. Hopefully these will provide some answers for you but if you have a question to ask, call us, we are happy to help. We do not charge any fees for an initial consultation.
If you are insolvent, it essentially means that you cannot pay your creditors on time and therefore leaves you vulnerable for your creditors to issue proceedings against you for the recovery of their debts.
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.
No! Just because a business is struggling, it does not mean that it needs to go ‘bust’. On the contrary, the majority of businesses experiencing financial difficulties seek early advice and do not go ‘bust’. With the appropriate advice, businesses find a way around the problem. Asking for help as soon as you recognise problems gives you a much better chance of survival.
In theory, anybody who is owed money can initiate insolvency proceedings. However, if it is in the public interest, the government can also do so. In reality, the majority of insolvency proceedings are initiated by business owners who recognise that by doing so, they are protecting the position for those who are owed money rather than continuing to trade, more often than not, worsening the position of creditors further down the line.
Subject to the extremities of the position, no company or business should go ‘bust’ providing it takes the right advice as early as possible with a knowledgeable Insolvency Practitioner. At IRL, we believe that you should explore all avenues available to you before implementing an insolvency procedure.
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, the Directors ultimately should be accountable. It is imperative that any Director of an insolvent or under-performing business takes advice and we believe that the earlier you do so, the better the outcome for all.
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.
H M Revenue and Customs, 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 will enable the team to negotiate a way around the predicament enabling the business to continue trading whilst it implements a repayment programme.
Partnerships are a complex state of affairs given their structure. Many partnerships are essentially a lot of individuals trading in their own names and other partnerships 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.
Business rescue is the term when an Insolvency Practitioner works with management to assist in the implementation of a turnaround of the business rather than having that business fail and suffer a subsequent insolvency process.
At IRL, we 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 its management are 100% behind the difficult task of turning around the under-performance. The only reason management need the assistance of IRL, is to advise and assist them in the implementation of the rescue plan given the unsavoury attitude of creditors when the pressure is mounted.