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.
What is the role of an insolvency practitioner?
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.
What options will the insolvency practitioner consider?
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:
- Administration – Company administration is a formal insolvency procedure typically entered into as a way of rescuing viable elements of a company. Once a company enters administration a moratorium is placed around it, stopping any ongoing or threatened legal action from creditors. This gives the appointed administrator (who must be a licensed insolvency practitioner) time and breathing space to formulate a plan going forwards.
- Company Voluntary Arrangement (CVA) – A Company Voluntary Arrangement (CVA) can be seen as a formal payment plan entered into by an insolvent company and its creditors. As part of the CVA, existing debts will be restructured into one affordable monthly repayment for the duration of the agreement which typically lasts between 3 – 5 years. A CVA will be proposed and overseen by an insolvency practitioner who will act as nominee and supervisor of the arrangement. In order for a company to successfully negotiate a CVA, it must be able to demonstrate ongoing viability to its creditors who will then vote on if the CVA is to be approved or not.
Can an insolvency practitioner help me close my company?
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.
What does the insolvency practitioner do during administration or liquidation?
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.
Who appoints an insolvency practitioner?
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.
Licensed insolvency practitioners in Scotland
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.
