With much of the government’s support for companies now withdrawn, these are challenging times for a growing number of firms. The UK is seeing rising levels of insolvency and so directors are increasingly having to make the often difficult decision to close their businesses. Should your limited company be insolvent, you will need to find an insolvency practitioner, who will be able to provide guidance and if necessary, oversee the liquidation process. 

How to find a local Insolvency Practitioner

What is an Insolvency Practitioner?

They are experts in insolvency law and are authorised to close companies and deal with creditors. It is a regulated profession and individuals who qualify will have undergone rigorous training and passed exacting examinations. A licensed insolvency practitioner must be appointed if you want to liquidate an insolvent limited company. They are also specialists in business turnaround and corporate recovery,

While it is possible to strike off a company if it is solvent and subject to following the necessary requirements, this is not permitted if a company is insolvent, whether because of cash flow problems or if its liabilities exceed its assets.

Why do I Need an Insolvency Practitioner?

If your company is unable to pay its debts because of insolvency, then you cannot allow this situation to continue. As a director you need to fulfill statutory duties to all creditors – this means you cannot sell assets or take money out of the directors’ loan account if this would put them in a worse position. You should therefore seek professional advice from an insolvency practitioner.

Where do I Find an Insolvency Practitioner

There are a number of routes to finding an insolvency practitioner. You can do a local search or ask for a recommendation, perhaps from your chartered accountant or legal adviser. You can also check that a firm is listed on the Insolvency Service’s directory – ((GOV “Find an Insolvency Practitioner” )).

How do I Find the Right Insolvency Practitioner for Your Firm?

Before making a choice, you should also do some groundwork, and check the following:

  • Does the insolvency practitioner specialise in company insolvencies (rather than personal)?
  • Do they focus on SMEs (rather than large organisations) and so offer appropriate formal insolvency procedures?
  • Do they have knowledge of your particular business sector?
  • Can they provide advice on business rescue options – if this is something you want to consider?
  • Will they agree to an initial free consultation to discuss your particular circumstances and provide advice?

You should also make sure that any insolvency practitioner you work with is a member of a professional body such as the Insolvency Practitioners Association (IPA), the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants in Scotland (ICAS) or the Institute of Chartered Accountants in Ireland – CARB (ICAI). 

Does my Insolvency Practitioner Need to be Local?

The fact an insolvency practitioner may have a small regional office is largely irrelevant – much of the work can be handled remotely, including creditor communication, and it may be more convenient for meetings to be held on Zoom or Teams. It is also usual for senior partners to travel widely when necessary throughout the UK to handle in-person meetings as necessary. Meanwhile, independent valuations will be carried out on assets.

When Should I Contact an Insolvency Practitioner?

The answer here for the business owner is the sooner the better – and if possible before you already enter insolvency. When problems relating to financial distress start to build up, it can be easy to put off seeking help. But, taking control by seeking expert guidance at an early stage can result in a far better outcome and mean you avoid the company being wound up in court. 

What can an Insolvency Practitioner Help With?

An insolvency practitioner can help in a range of circumstances and this is not just with liquidation proceedings.

This could include handling negotiations with HMRC, for example, which is quick to escalate enforcement action. They can also help you ascertain the severity of your company’s financial situation and advise on the most suitable way forward, whether this is liquidation or whether an alternative such as administration if a sale is a likelihood or a Company Voluntary Arrangement, where the company is allowed to continue trading and agreement is reached with creditors to make repayments over an agreed period of time. An insolvency practitioner will have wide-ranging contacts that could facilitate a sale or perhaps introduce new lines of funding that could ensure the company’s survival.

If you wish to close the company, but it is solvent, then you may also want to liquidate via a Members’ Voluntary Liquidation (MVL). 

An MVL is a formal process used to bring a solvent limited company to a close – this means it can pay all its due taxes and creditors and a sworn declaration must be made by directors to this effect. The liquidator will realise the company’s assets, settle debts and distribute any surpluses to directors. There can be considerable tax advantages with an MVL, via Business Asset Distribution Relief, but it is only suitable for those businesses that have assets in excess of £25,000.

Meanwhile, they can help you decide not only if you need to liquidate but if it is, then when is the right time.

If there is no prospect of recovery then it is likely that an insolvency practitioner will recommend the company is placed into a Creditors’ Voluntary Liquidation (CVL). This will allow an orderly closure of an insolvent company and ensure creditors are paid where possible to comply with the Insolvency Act 1986 – ((LEGISLATION “Insolvency Act 1986” )) – and with the process fully overseen by the insolvency practitioner. They will also handle any redundancies if required and advise staff – and directors – on their entitlements to statutory redundancy pay.

Once the firm is closed, it will be removed from the Companies House register and the directors will be able to start a new business if they wish to do this.

Is it Time to Take Insolvency Advice?

If you are seeking advice from a licensed insolvency practitioner, and are a director of a UK business, then do not delay. You can speak in confidence to an insolvency expert at Company Debt and plan a way forward.