Insolvency Practitioners and Business Rescue
There are few businesses, however large or small, that will not face challenges and it is their leaders’ response to those difficulties that will determine their future.
The same applies to individuals who may be facing their own crisis – how they react, and the timing of any decisions they make will be crucial.
“Very effective, professional and sensitive during a difficult period for my company. They made the process seamless and were very patient about fees and settlement. I would hope I don't need them again but would recommend anyone of their services if that time comes.”
– Mr Noriss
What is Insolvency?
Insolvency happens when a company is unable to pay its debts on their due dates or has insufficient assets available to cover the total of their debts.
It is the director’s responsibility to recognise when a company has become insolvent, and they can be held legally responsible for allowing the company to continue to trade if it is indeed insolvent.
There are many procedures available to insolvent companies and choosing the right option for you and your business is critical. For example: Administration, Administrative Receivership and a Company Voluntary Agreement (CVA) are all solutions that offer potential rescue for the business.
It is most often preferable for a company to continue trading using one of these processes in order to preserve the company’s value and retain its existing customer base.
However, if the businesses cannot be rescued the company will be placed in to liquidation. This process involves the company’s remaining assets being turned into cash and distributed among its creditors. This solution often results in the termination of the company’s trading activities.
The insolvency processes can be initiated by any single creditor or group of creditors. It can be initiated by the courts and lending institutions, or by directors and shareholders of the company itself.
The aim of any of the Insolvency procedures is to extract the greatest value out of the company for the benefit of its creditors. The individual circumstances of the business and the total available assets will determine which process is best suited to achieve this aim.
What is the Insolvency Process?
- Firstly, the company's directors must recognise the company is insolvent. There are two tests which can help to determine if this is the case:
- The balance sheet test: Is the value of your combined assets less than your total liabilities.
- The cash flow test: Will you be able to pay your bills when they are due?
- Do the test with our FREE Insolvency Calculator
- Control of the company’s assets are then passed to a licensed Insolvency Practitioner, who will initiate the appropriate procedure. As the company’s assets become available they will be distributed in a strict order of priority.
- Organisations with fixed charged security over the company’s assets will be paid first.
- The next group of creditors to be paid will be preferential creditors. This pay-out usually consists primarily of employee’s wages and holiday pay.
- Creditors holding floating charge securities will be next in line to receive finds, followed by unsecured creditors.
- If there are any funds remaining, the last group of creditors to be paid will be the stakeholders themselves.
Do I need an Insolvency Practitioner?
When a company is experience financial difficulty, it is highly advised you seek professional advice from a licensed insolvency company.
An Insolvency Practitioner has the experience, knowledge and qualification to offer quality and trustable advice, guiding you toward the best option for your business’s specific circumstances.
ONLY licensed Insolvency Practitioners are authorised to provide insolvency services of any kind in the UK.
Insolvency Practitioners are uniquely qualified to understand an insolvent companies’ financial situation and recommend the optimal option, that will ultimately result in the best available outcome for your company and its creditors.
At Wilkin Chapman Businesses Solutions, we have decades of combined experience as Insolvency Practitioners and are available throughout the UK, travelling from one of our nearby offices.
Which is the best Insolvency option for me?
Ultimately, the primary objective of a formal insolvency procedure is to maximise returns for the company’s creditors.
In most cases, the best way of achieving this aim is to keep the company operating by means of a rescue procedure.
The sooner a company seeks help from a licensed Insolvency Practitioner, the greater the likelihood a business can be rescued.
Do not hesitate, if you need Insolvency advice or think your company may be insolvent, Wilkin Chapman Business Solutions can help.
Case information can be accessed by creditors using a case reference and password.