From April 2017, changes to UK insolvency legislation mean that directors can expedite the liquidation process if their company becomes insolvent and cannot be rescued. It is often the case that directors fear creditor legal action in these instances, a situation which could potentially result in enforced liquidation and greater exposure to the risk of personal liability.
The government’s intention in changing the regulations is to modernise insolvency practices, increase creditor participation in these processes, and reduce their administrative cost. These costs are borne by the insolvency estate, and can considerably reduce creditor returns.
One of the changes introduced by the Small Business, Enterprise and Employment Act, 2015 (SBEE), removes the requirement to hold creditors’ meetings. Previously an initial meeting of creditors, also known as a Section 98 meeting, was held to officially appoint the liquidator, agree their remuneration, and allow a Statement of Affairs to be presented which detailed the insolvent company’s financial position.
It is now possible for directors to accelerate the liquidation process online. Previously, procedures were slowed down by the requirement to hold a meeting with creditors. In reality, however, these meetings were poorly-attended and often represented a waste of time and money for all those concerned.
Using technology and modern methods of communication, directors can now expedite the liquidation of their company, making a significant difference to the entire experience of insolvency.
Final meetings of creditors have also been abolished, saving further cost and allowing a swifter conclusion than would otherwise be possible. In-person meetings can still be convened if specifically requested by creditors, but it is hoped that by taking advantage of modern technology, this will be the exception rather than the rule.
‘Deemed consent’ also forms an important part of the new legislation once the liquidation procedure has begun. Deemed consent means that office-holders can assume the approval of creditors, unless 10% by value or in number, or 10 creditors, make an objection.
Deemed consent does not apply with regard to setting the office-holder’s remuneration, however. Faster decision-making procedures will benefit the company’s directors as well as its creditors, enabling greater efficiencies of time and financial resources.
As the UK’s largest professional services consultancy, Begbies Traynor offers unrivalled expertise in the area of insolvency. We operate from 44 offices around the country, and can help company directors in a number of ways.
A free same-day consultation is offered as a matter of course, and allows us to quickly establish the company’s true financial position. In short, we analyse business assets and liabilities, and assess the situation by taking into account various other aspects such as previous creditor action, and any imminent threats against the company.
This also ensures that liquidation is the most appropriate route for the company to take, and offers reassurance to its directors that they are in compliance with insolvency rules and regulations.
Once a full assessment has been made we can provide a quote for online liquidation, setting out the services and support we offer. The cost of liquidation varies according to each company’s circumstances, but in general, costs increase in line with the complexity of each case.
Liquidation costs must receive creditor approval prior to commencing the process, but this is now facilitated using electronic means including email and ‘virtual’ meetings, rather than the in-person meeting that was previously required.
Companies benefit from the extensive practical experience and in-depth theoretical knowledge of our insolvency practitioners. By utilising the new streamlined methods now available when liquidating a company, directors can pursue this procedure without the time delays that were inherent within the previous system.
For more information on how we can help to liquidate a company in distress, call our experts at Begbies Traynor for a same-day appointment at one of 44 local offices. This professional advice and support is a vital component that helps directors deal with a distressing and potentially volatile situation, also reducing the chances of future misconduct allegations.