When Do I Need to Contact a Licensed Insolvency Practitioner?

Updated: 8th February 2021

Many people believe that Insolvency Practitioners (IPs) are only called in once a company has actually become insolvent, but this is not the case. The role of an IP includes the provision of advice to directors whose company is still solvent, but who need help to turn its fortunes around and trade profitably again.

If your business is being threatened by creditor legal action or you are experiencing temporary cash flow problems, obtaining professional advice can make a huge difference to the fate of the company.

Act quickly to prevent long-term problems

Speed is of the essence in these circumstances, and acting without delay opens up a wider range of options, potentially including:

  • Company restructure
  • The sale of assets to inject cash into the business
  • Voluntary liquidation
  • Sale of the business as a going concern.

Assuming that the company was previously trading profitably and the underlying business is fundamentally sound, consulting a licensed Insolvency Practitioner at an early stage offers the best chance of survival.

The reason for your financial problems can be something as simple as an unexpected bill. Maybe a key customer has become insolvent themselves, or a downturn in the market has adversely affected trade and you find yourself unable to pay your suppliers.

Begbies Traynor is licensed to provide advice for companies experiencing financial problems. We will identify and present all your options for recovery or restructure, keeping in mind the long-term goals for your business.

How can a licensed IP help in practical terms?

An Insolvency Practitioner can negotiate with creditors on your behalf, put forward all the options available to you, and recommend the best course of action in your company’s circumstances.

Engaging your creditors in professional negotiations instils a sense of confidence in the company’s long-term ability to pay its bills. Creditors are more likely to respect and trust in the judgement of a professional advisor, and be guided by specialist knowledge.

Intervention on your behalf might be all that is needed to set the company back on the right track, especially in the case of HMRC.

Help in negotiations with HMRC

Discussions with HMRC can be particularly problematic and stressful for directors – negotiations that, if not conducted proficiently and with an understanding of HMRC’s point of view, could signal the end of the road for your company.

HMRC are known to collect monies quickly and aggressively. They have the power to issue a Notice of Enforcement without recourse to the courts, which would result in goods being seized from your business to pay tax arrears or other overdue amounts.

Apart from having adverse long-term effects on your company’s credit rating, this action could potentially lead to its closure.

However, there may be the possibility of negotiating a Time to Pay (TTP) arrangement with HMRC which will allow you to settle your tax arrears through a series of up to 12 monthly repayments. If you get a TTP arrangement approved you must ensure you keep up to date not only with the agreed monthly repayments for your tax arrears, but also for any current and future tax bills. Failure to do this could see you breach the terms of the TTP arrangement.

An investment in the company’s future

Consulting a licensed Insolvency Practitioner is an investment in the future of the company. Without this type of guidance directors could ultimately face issues over personal liability for company debt, closure of the business, and accusations of wrongful trading, whether or not they were acting in good faith by attempting to trade out of difficulties.

An IP will look in detail at business operations, trading figures and accounts, to identify the best way forward at an early stage. This does not necessarily mean entering a formal insolvency procedure, but if that becomes the only option, an IP will ensure that the correct route is chosen – one that maximises creditor interests, but also keeps the interests of the business in mind.

What type of advice can be offered?

An insolvency practitioner can offer advice on a wide range of issues to help improve the financial situation of your business. Here are just a few:

As you can see, Insolvency Practitioners have a broad remit when it comes to giving advice. Whether it is providing simple tips on how to deal with temporary cash flow problems, or drawing up a Statement of Affairs to present to your creditors, their involvement and influence throughout the process is invaluable.

Begbies Traynor is the leading insolvency practice in the UK. We offer a free same-day consultation with one of our experts, and operate from offices around the country.

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