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With over 30 years experience we can provide a solution tailored to your individual needs.
The Most Common Questions We Help Answer
Who should I contact first?
If your business is showing signs of financial distress, it is important you seek professional advice early.
A licensed insolvency practitioner (IP) is best placed to help you identify the issues and explore with you the options available, allowing you to make an informed decision on the way forward.
The earlier you approach an insolvency practitioner the more options there will be.
It is important that you do not continue to trade an insolvent business to the detriment of the creditors, or you may be found guilty of wrongful trading and be held personally liable for the debts of the Company from the onset of insolvency.
Talk to us, because at McLenan Corporate we offer an initial consultation completely free of charge. You never know how important that call could be, and how far it could go to alleviating your stress.
Who appoints my Insolvency Professional?
An Insolvency Practitioner (IP) can be appointed by the company, the directors, any creditor or creditors, any contributory or contributories. It’s important to note that whoever initiates the process will be on the hook for the costs.
Will the insolvency of my company affect me as a Director?
If your company is failing it is important you act quickly to minimise your personal risk.
Your limited company may be a separate legal entity with limited liability and if you have acted properly, you may only be personally liable for any Company debts where you have given personal guarantees.
However, it is important to know that as a director of a financially distressed company you have a duty to act in the best interests of the creditors, if you continue taking credit knowing that the Company cannot possibly repay it, then you may be guilty of wrongful trading and may be held personally liable for company debts from the onset of insolvency.
Voluntary Liquidation is a quick and efficient way to wind up an insolvent company but there may be other options depending on the company’s position.
When does insolvency occur?
Insolvency occurs when a company is unable to pay its debts.
There are two tests, the “balance sheet test” this is when a company has more liabilities than assets and the “cash flow test” this is when it is unable to pay its bills when they become due.
A company that is insolvent is in danger of being closed down, however, company directors may be able to take action that allows them to continue trading.
If your company has financial problems, even if you think they may be temporary you should ensure you understand your options by seeking professional advice from a licensed insolvency practitioner.
Which form of insolvency is correct for...?
Various options are available to a company facing insolvency. There are both Statutory and Non Statutory options available.
Statutory solutions set out in Insolvency legislation, such as; Administration, Company Voluntary Arrangements and Liquidations are:
Generally binding on all parties with a body of case law to assist with resolving any disputes
By entering into a statutory solution as soon as you become aware of Company insolvency you are usually protected from personal liability and for the Company’s losses
There are still certain circumstances where your prior conduct may leave you liable financially and/or subject to disqualification proceedings.
Non statutory options may be more flexible and less costly, but generally carry higher risk for directors and may not be binding on all parties.
Can my company recover from insolvency?
This is such an important question, given a lot of the assumptions and misinformation around insolvency.
Insolvency describes both the situation an insolvent company is in, and the procedures for dealing with the situation in terms of the Insolvency Act 1986.
There are several options that may allow an insolvent company to continue trading if the business is viable and you believe there is an opportunity to trade out of difficulty. Extreme care must be taken to ensure this is not to the detriment of the creditors. Or the director could find himself guilty of wrongful trading..
- Reach an informal agreement with all creditors.
- Restructure the debt.
- Enter into a Company Voluntary Arrangement (CVA).
- Put the company into administration, offering protection from creditor action and providing a breathing space to allow a company to either trade out of its current financial difficulties or to allow a rescue package to be put in place.
What happens if my company is liquidated?
Liquidation legally “winds up” a limited company. It will cease trading and employing people. On completion of the winding up process it will be struck off the register at Companies House, which means it ceases to exist.
Both solvent and insolvent companies can be wound up by the company, their directors, any creditor or creditors, any contributory or contributories.
Liquidation is overseen by a Liquidator who will:
- Collect any monies owed to the company
Sell all assets.
- Make sure all company contracts are completed, transferred or otherwise ended.
- Settle any legal disputes.
- Distribute any funds available to creditors.
Only a licensed insolvency practitioner can act as a Liquidator.
What is an Insolvency Practitioner (IP)?
An Insolvency Practitioner (IP) is someone who is licensed and authorised to act in relation to an insolvent individual, partnership or company.
An IP must hold a licence and have:
Passed the JIEB insolvency exams
Gained experience in insolvency work
Satisfied an authorising organisation (also known as a regulator) they are fit and proper to act as an Insolvency Practitioner
IPs must follow the law and their work is monitored by regulators to make sure that they do. An IP is able to provide advice in an attempt to save a business, when acting, insolvency practitioners have to consider the best option for the company whilst protecting the creditors and may undertake appointments in all formal insolvency procedures including:
Company Voluntary Arrangements
Sequestration / Bankruptcy
Individual Voluntary Arrangements
How do I know my insolvency practitioner is regulated?
The insolvency profession is regulated and overseen by various recognised professional bodies (RPB) that are organisations approved by the Secretary State for Business Innovation and Skills.
The RPBs are independent bodies that make their own membership rules and regulations, but they are required to have in place rules to ensure their Insolvency Practitioners (IP) meet acceptable requirements as to education, practical training and experience.
One of the main requirements is that individuals must pass their Joint Insolvency Exams to qualify as an Insolvency Practitioner. When they act as an Insolvency Practitioner that Law requires them to have in place a ‘bond’, a form of insurance, against which a claim could be made if the practitioner acts fraudulently or dishonestly.
All IPs are also subject to regular monitoring visits from their authorising bodies. Monitors seek to ensure that IPs are adhering to the legislation, and to accepted standards such as Statements of Insolvency practice, the Insolvency Code of Ethics and the relevant rules and regulations of their authorising bodies.
In insolvency, who gets paid first?
In an insolvency, it is unlikely there will be funds to pay all creditors.
The hierarchy by which claims and expenses are paid is known as the Order of Priority and although there are slight differences between processes they generally follow the order noted below:
- Secured creditors: Holders of fixed charges.
- Expenses of the insolvency process: Insolvency practitioners fees and expenses.
- Preferential debts: Employees related claims up to prescribed limits.
- Secondary preferential creditors: HMRC for certain types of taxes collected on their behalf, such as PAYE and VAT.
- Floating charge and prescribed part creditors.
- Ordinary unsecured debts.
- Interest on preferential and unsecured debts.
- Postponed creditors.
Who pays my insolvency practitioner?
Expenses of the insolvency process are met from the assets of the company in priority to creditors’ claims.
In cases where there may be insufficient funds available from the realisation of assets, fees will require to be guaranteed by the directors and a payment on account is likely to be required before the process begins.
The creditors who hope to recover some of their debt out of the assets, therefore have a direct interest in the level of costs and in particular the remuneration of the insolvency practitioner.
The insolvency regulation recognises this interest by providing mechanisms for creditors to fix the basis of the insolvency practitioners remuneration.
Don’t See The Answer You’re Looking For?
Contact us today for an informal, confidential chat
…or fill out the form below and we will get back to you promptly.
If we believe your business is viable, we will consider every option to rescue it, but if that is not possible, we will guide you every step of the way through an exit strategy.
“I recently turned to McLenan Corporate for business advice.
We found Margo to be very friendly and approachable which was very much appreciated at a worrying time.
McLenan’s knowledge, professionalism and advice was 1st class. The advice we were given turned out to be spot on and helped us out a difficult situation.”
We Understand Our Clients’ Needs
If you are feeling pressure, it is never too early to seek professional advice.
McLenan Corporate have over 30 years’ experience working with financially distressed businesses and offer a free confidential, no obligation, options review. This will allow you to make an informed decision on the way forward for your business.
Our priority is always to rescue a business, but if that is not possible we can guide you every step of the way through your exit strategy.
Are you an Accountant with clients who are in financial difficulty?
Are you looking for a friendly approachable IP to refer those clients to? Someone you can rely on to guide them through rough waters, helping to strengthen your relationship?
We specialise in supporting accountants to support their clients and offer free advice either directly or through you on a range of issues, depending on your preference.
Insolvency Practitioners Association
Ensure your Insolvency Practitioner is licensed to act in the UK by a Recognised Professional Body. We are members of the Insolvency Practitioner Association and as such bound by the Code of Ethics when carrying out all professional work relating to an insolvency appointment.
At McLenan Corporate
We work with financially distressed companies and have a track record of rescuing businesses and saving jobs.
It’s important not to stay feeling isolated or worried about your business debt. The earlier we can get involved the more options there will be.
The road to recovery is a simple 3 step process…
Get Your Free Options Review
Here we guide you through our free, no obligation option review to help you make the right decision for you and your company moving forward.
The solution is tailored to your individual needs. If you decide to go ahead we take care of the entire process and implement the strategy.
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McLenan Corporate is a trading name of McLenan Corporate Solutions Limited, 1 Union Street Saltcoats KA21 5LL. Company Number SC651445.
Margo McLenan is licensed to act as Insolvency Practitioner in the UK by the Insolvency Practitioner Association.
Insolvency Practitioners are bound by the Code of Ethics when carrying out all professional work relating to an insolvency appointment.