Calling in the help of an insolvency practitioner is the end of the business, right? Actually, that’s not always the case. An insolvency practitioner may well be the person that can help save the company from liquidation.
Licensed insolvency practitioners are there to help companies dealing with debt resolve their problems, from dealing with creditors and renegotiating payment terms to arranging voluntary agreements to get the company back on its feet. Here are some ways an insolvency practitioner services can help rescue a company from debt.
Arrange a monthly payment plan
The appointed insolvency practitioner is able to arrange payment plans with the company’s creditors. The company would either enter an IVA (Individual Voluntary Arrangement) for sole traders or a CVA (Company Voluntary Arrangement) for companies. The monthly payment which is manageable for the business is sent to the insolvency practitioner, who then distributes the funds among the creditors.
The insolvency practitioner deals with the company’s creditors to get their agreement to an IVA or CVA. A minimum of 75% of the creditors must agree to the arrangement before it can proceed. Once the payment plan is official and active, the creditors are no longer entitled to contact the company or push for payment of the debt. That means all future communication has to go through the insolvency practitioner.
They take on the role of the nominee and supervisor, responsible for developing a viable proposal for the IVA or CVA, as well as the Statement of Affairs (SOA), and informing the creditors of how much they will be receiving through the agreement on a monthly basis. The insolvency practitioner continues in the role of supervisor throughout the IVA or CVA term, overseeing any matters that arise.
Arranging an IVA or CVA with creditors through an insolvency practitioner reduces the stress levels and there is a middleman between the company and the creditors. The insolvency practitioner will conduct an annual review to ensure that the payment plan is on track and the company is paying off its debts.
Liquidating via a members’ voluntary liquidation (MVL)
For solvent limited companies that want to wind up the business, which can be due to a variety of reasons such as retirement or a merger, an insolvency practitioner has to be appointed who will handle all the necessary affairs. Usually, the director or directors of the company will seek an insolvency practitioner to progress the MVL. They will take control the of company once the MVL is official, post an advert in The Gazette, deal with any outstanding invoices or creditor claims and ensure that all tax commitments are paid. They’ll also arrange for any remaining assets to be valued and sold, with the proceeds distributed accordingly, and finally having the company removed from the official register at Companies House.
Acting as a liquidator/administrator
For a company that is winding up, be it solvent or insolvent, a licensed insolvency practitioner will be instructed to act as the liquidator. A major part of their role is to ensure that the liquidated company’s assets are realised and funds are distributed in the appropriate order to creditors and HMRC. Often with a solvent company, the directors will have made the necessary arrangements regarding assets and inventory prior to starting the liquidation process, but will have taken the advice of an insolvency practitioner initially.
When an insolvency practitioner is handling a company administration, they may be involved with organising pre-pack administration sales, and even the sale of the company, endeavouring to gain as good an outcome as possible for the creditors of the company.
The role of an insolvency practitioner
Licensed insolvency practitioners are authorised to handle company insolvency, administration and liquidation under the Insolvency Act 1986. They are also there to offer companies that are struggling for valuable advice. Some of their duties include:
• Taking control of the business during liquidation or administration processes to deal with the company’s assets and other administrative matters
• Filing a report about the company for the creditors to include reasons as to why the company failed
• Try to rescue the company and preserve jobs, if possible
• Handle any legal claims and any other action taken against the company
• Deal with the negotiations between the debtors and the creditors to agree voluntary arrangements to make regular payments
Whilst it’s not possible to save every company that gets into an insolvent position, the insolvency practitioner will always do their best to make repayment arrangements and keep the business trading. They are experienced at identifying areas of the business where changes can be made and costs can be cut in order to save money, aiming to turn the fortunes of the company around and be back in profit. They are able to help businesses deal with creditors prior to them taking any action against the company, such as forcing liquidation.
A company with any financial issues can seek the help of an insolvency practitioner, particularly if they are relying on a substantial overdraft, are looking for alternative ways of raising funds when traditional routes are not available, and advising where the main creditor is HMRC, such as non-compliance with PAYE or VAT, to agree a Time to Pay arrangement.
Business rescue plan
Another area where an insolvency practitioner can offer good advice is when a business is struggling and needs to develop a business rescue plan. Taking action as soon as a problem is identified and seeking help is one of the best ways to aim to keep a business afloat.
Some businesses over the years can lose its focus for a variety of reasons, usually linked to changes with the board of directors. A company needs a focus which acts as the driving force, ensuring that potential opportunities are acted upon and business activity increases. Without direction and a strategy to plan ahead, it’s difficult for a company to know which direction they are heading. An insolvency practitioner is able to work with the business to identify potential areas of growth, analysing the company’s strengths, weaknesses, opportunities and threats in order to develop a business plan for the company, and avoid insolvency.
If your company is struggling for any reason, or it has lost its way and guidance is needed to get back on a forward-thinking footing, our team of professional insolvency practitioners are here to guide you. Call us today on 0800 246 5895 or visit our website.