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Insolvency & Corporate Recovery
We provide practical commercial advice to businesses, directors, creditors, and insolvency practitioners on all aspects of corporate and personal insolvency and restructuring.
- Agriculture & Rural Business
- Business Contracts
- Commercial Property
- Company Formations
- Debt Recovery
- Dispute Resolution
- Employment Law
- Insolvency
- Licensing
- Mergers, Sales & Acquisitions
- Property Development
- Sports Law
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At a time when it is all too easy to bury your head in the sand, prompt action is vital.
Insolvency law and practice can seem daunting, but it is essential for businesses and individuals to act promptly when facing financial difficulties. We work closely with leading insolvency practitioners, accountants and lenders to provide clear and concise guidance and support to keep you and your business heading in the right direction, including managing finances, debt and cash-flow, refinancing and restructuring, and formal insolvency procedures.
We can help you with:
For businesses:
- Administration
- Compulsory liquidation
- Members’ voluntary liquidation
- Creditors’ voluntary liquidation
- Company voluntary arrangements (CVAs)
- Law of Property Act (LPA) receivership
- Administrative receivership
- Insolvent partnerships and LLPs
- Business turnaround, refinancing and restructuring
- Debt and asset recovery, including retention of title to goods
- Asset, business and property sales
- Statutory demands
- Winding-up petitions and statutory demands
- Lender security reviews and enforcement
- Reviewable transactions, including preferences, transactions at an undervalue, misfeasance and transactions defrauding creditors.
For individuals:
- Bankruptcy
- Individual voluntary arrangements (IVAs)
- Directors’ duties and personal liability including wrongful trading, fraudulent trading and misfeasance
- Disqualification of directors
- Bankruptcy petitions and statutory demands
- Liability under personal guarantees
To arrange a consultation or speak to one of our lawyers, please call 01482 320620 and ask for Rob Ripley or Mike Wilson.
Alternatively, click here to enquire online.
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FAQs
What is insolvency?
A business is insolvent if it is unable to pay its debts as they fall due (i.e. on a “cash flow” basis) or if the value of its liabilities is greater than the value of its assets (i.e. on a “balance sheet” basis). It is important to note that solvency is different to profitability and a business can be insolvent even though profitable and vice versa.
What should I do if my business is in financial difficulty?
The most important thing to do is to face up to it. Acting promptly by seeking professional advice from a lawyer, accountant or insolvency practitioner will give you the best chance of protecting the business, its employees and creditors and will reduce your risk of personal liability and/or directors’ disqualification proceedings.
What are the options for an insolvent company?
If the underlying business of the company is sound, it may be possible to rescue the company and save the business by restructuring or refinancing. This can sometimes be done without a formal insolvency process, or through an administration order or company voluntary arrangement (CVA) or scheme of arrangement. Advice from a qualified insolvency practitioner is essential.
If the company or business cannot be rescued, the options include administration, administrative receivership or liquidation. Again, advice should always be taken from a qualified insolvency practitioner as to the best option in the circumstances.
Who can start insolvency proceedings?
A creditor (or group of creditors) owed more than £750 can issue an application (or petition) for the court to wind-up a company by “compulsory liquidation”. This is usually preceded by service of a statutory demand. The directors or company itself can also present a winding-up petition for compulsory liquidation.
Alternatively, the shareholders (members) of a limited company can decide (or resolve) to wind-up the company by “voluntary liquidation” without the need for court proceedings. There are two-types of voluntary liquidation; members' voluntary liquidation (MVL) or creditors' voluntary liquidation (CVL).
A company can be placed into administration by the court on an application by the company, directors or creditors or by an out-of-court route by the company, directors or a qualifying floating charge holder.
A company voluntary arrangement (CVA) can only be instigated by and implemented under the supervision of an insolvency practitioner.
An individual can only be declared bankrupt by the court on an application by one of his creditors owed more than £5,000 or by the individual himself. An individual voluntary arrangement (IVA) can be proposed by the individual himself or by his trustee in bankruptcy.
What should a company or individual do if served with a statutory demand?
It is important to act quickly, the creditor will be entitled to present a petition to wind up the company or for bankruptcy 21 days after service of the demand. The options available to a company include, paying the sum demanded or negotiating a reduced or deferred payment, or if the claim is disputed, apply to court for an injunction to prevent winding up proceedings being commenced or challenging a petition to wind up the company.
An individual served with a statutory demand can, within 18 days after service of the demand, apply to court for the demand to be set aside on the basis that it is disputed on substantial grounds or if they have a counterclaim or set-off that would reduce the debt to less than £5,000.
What issues do directors face?
Directors of limited companies owe a range of duties (known as “fiduciary duties). Where a company is insolvent, or at risk of insolvency, the directors owe a duty to act in the best interests of the company’s creditors (as opposed to themselves or the company). Directors of companies in financial difficulty also face a number of issues, including:
• What can they do to keep trading without committing an offence or incurring personal liability?
• When should they stop trading?
• If they do stop trading, which insolvency procedure should the company use?
As soon as directors are aware that a company is in (or at risk of) financial difficulty, they should seek professional advice. The same applies to members of an LLP.
Can directors be personally liable?
The directors of a limited company are not generally personally liable for its debts, unless they have given a personal guarantee. However, directors (including both executive and non-executive directors and “shadow” directors) can be made personally liable in circumstances where there has been wrongful or fraudulent trading, misfeasance or breaches of duty. Directors can also face disqualification proceedings. Directors can avoid or reduce this risk by seeking professional advice as soon as they become aware that a company is in (or at risk of) financial difficulty.
What is a directors’ disqualification order?
Under the Company Directors Disqualification Act 1986 (CDDA 1986), the court can make a disqualification order banning an individual from being a director of a company (or being in any way involved in the formation, promotion or management of a company) for between 2 to 15 years. Such an order can be made on the basis of “unfit conduct”, which can include
allowing a company to continue trade when insolvent, not keeping proper company accounting records, not filing accounts and returns at Companies House, not paying tax or using company money or assets for personal benefit. An individual can be fined or imprisoned for up to 2 years if they breach the terms of the disqualification.
What is wrongful trading?
If a director or directors of a limited company fail to comply with their duty to take every step which a reasonably diligent person would take to minimise potential loss to the company’s creditors, by continuing to trade, take credit or incur liabilites for example, once they conclude (or should have concluded) that there is no reasonable prospect of the company avoiding an insolvent liquidation or administration, those directors can be made personally liable (by an order of the court) to contribute to the company’s assets. This is known as “wrongful trading”.
What is fraudulent trading?
Where, during the course of a liquidation or administration of a company, it appears that any business of the company has been carried on with the intent to defraud creditors of the company, the directors can be made personally liable (by an order of the court) to contribute to the company’s assets. This is known as “fraudulent trading”. Fraudulent trading may constitute a criminal offence.
What is a preference?
A company grants a preference where it does something or suffers something to be done which puts a creditor, surety or guarantor in a better position than it would otherwise have been in if the company went into insolvent liquidation, was influenced by a desire to prefer that party and was insolvent at the time (or became insolvent as a result). In these circumstances the court can make an order restoring the position by ordering the party to return property or its value to the company for example. Examples of preferences may include paying an unsecured creditor in priority to other creditors, granting security to a previously unsecured creditor, repaying a director's loan, or reducing a company debt guaranteed by one of the directors.
What is misfeasance?
A claim against a director for misfeasance can arise where a director breaches a fiduciary or other duty in relation to the company, misapplies or retains money or other property of the company, becomes accountable for money or other property of the company or is otherwise "guilty of misfeasance".
What is retention of title?
When goods are sold, title to the goods will often pass to the buyer on deliver or collection rather than on payment. A retention of title clause can be used to provide that title to the goods is retained by the seller until it has received full payment for the goods. This can allow a seller to recover goods if the buyer fails to pay for them because it is insolvent, or for some other reason.