Reviewed 8th December 2023
Therefore if you believe your company is insolvent, or is approaching insolvency, it is vital that you seek the help and advice of a licensed insolvency practitioner as a matter of urgency. The sooner you obtain advice, the more options will be open to you and your company, significantly increasing your chances of being able to save the company from closure.
The duties of an insolvency practitioner will depend on what insolvency process the company in question enters. In the case of liquidation, the insolvency practitioner will assume the role of liquidator; in an administration, the insolvency practitioner will assume the role of administrator. Prior to this appointment, it must be determined which process is suitable for the company.
An insolvency practitioner’s job begins therefore when they are approached by the director of an insolvent company seeking advice. At this early stage, the insolvency practitioner will need to build up a picture of the company’s financial and operational position to determine whether the company can be saved or whether closure is the only viable option.
When it comes to company insolvency, the good news is that there are a range of formal and informal processes which can be used to help get the company back on a solid financial footing. Depending on the position of the company and its future viability, formal insolvency options which could be considered by the insolvency practitioner include:
If the company’s financial worries have taken it beyond the point of rescue, or if you have decided that you no longer wish to continue running the company, your insolvency practitioner may suggest placing the company into liquidation using a process known as a Creditors’ Voluntary Liquidation (CVL). Opting for a CVL will ensure the company it is closed down in an orderly and compliant manner in accordance with the Insolvency Act 1986.
Once the route forward has been agreed, the insolvency practitioner will begin either liquidating the company or working towards rescuing it. From the time of their appointment as either liquidator or administrator, the insolvency practitioner will handle the company’s affairs including identifying assets, liaising with creditors, and ensuring outstanding debts are paid as far as possible. In the event of the company entering administration, the insolvency practitioner may also take over the day to day running of the business prior to a sale or restructuring process.
The exception to this is in the event of a CVA. An insolvency practitioners role is less ‘hands on’ during a CVA as the company’s directors will continue to trade as usual; the role of the insolvency practitioner is to propose the arrangement to creditors, and if approved, supervise the agreement, collect the agreed payment, and distribute this to creditors.
An insolvency practitioner can be appointed by the courts, a disgruntled creditor, or the director of a limited company. In many cases, insolvency practitioners are appointed directly by the company’s directors once they realise the financial situation they are in requires professional help.
In some cases, a creditor can ask the courts to appoint an insolvency practitioner and force the company into liquidation following a winding up petition. This is known as compulsory liquidation.
While the options available to insolvent companies in Scotland are the same as those available throughout the rest of the UK, there are some slight differences in the legislation applicable to those companies registered in Scotland.
It is therefore vital that you ensure you are speaking to an insolvency practitioner who understands and appreciates the differences between administering a formal insolvency arrangement for a company registered in Scotland and one which is registered within the rest of the UK.
At Scotland Debt Solutions, all our insolvency practitioners are licensed to act in regard to Scottish registered limited companies meaning we can give you the right advice tailored to your own unique circumstances and you can rest assured the correct procedures applicable to Scotland are being followed throughout. We have five offices located across Scotland, meaning you are never far from expert help and advice for your limited company.
Our debt report is completely easy to use and is a great starting point for anyone with over £5000 of debts looking to take control of their debt issues. By providing us with details of your incomings and outgoings we can suggest the most appropriate way forward for you.
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Administration is an insolvency process that provides breathing space for companies struggling with debt, giving them the time needed to establish a plan going forwards. With several options potentially available at the end of administration, it’s an effective step for many businesses.Find out More
Whether you are a sole trader or a limited company director, we can help you work through your current financial problems including money owed to HMRCBusiness Debts
A Company Voluntary Arrangement (CVA) can help a company to escape debt by negotiating a formal payment plan with creditors allowing for reduced monthly repayments. Directors retain full control of their company during a CVA and the business is allowed to continue trading throughout.Find out More
When a limited company becomes insolvent, it’s important for directors to place the interests of creditors first and do all they can to minimise further losses. Creditors’ Voluntary Liquidation (CVL) is an insolvency process that allows this to happen, and ensures directors comply with strict insolvency laws.Find out More
Members’ Voluntary Liquidation (MVL) allows you to close your business and extract the profits in a tax-efficient way. It’s a process that’s available to solvent limited companies, and requires you to make an official Declaration of Solvency prior to commencement.Find out More
A director’s loan account (DLA) can become overdrawn if too much money is taken from the company that isn’t salary or a dividend. Directors’ Loan Accounts are useful when operated with caution, but can be a cause of concern if the company becomes insolvent.Find out More
A Winding-up Petition is a legal notice presented to the court by a creditor with a view to forcing a company into liquidation. If a winding-up order is granted by the court, compulsory liquidation can take place very quickly, and this signals the end of the company.Find out More
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