Bankrupt, Insolvent or in need of rescue? Posted: May 11, 2020

What happens when you reach out to an Insolvency Practitioner?

I doubt any business owner is totally ready for the pressure that being in charge can bring. It’s hard being the person at the top, particularly when it comes to having money issues. Every company is unique in its own way but if there is one thing they have in common, it is the sleepless nights that come along with the realisation that you may be in trouble financially. Whether you are struggling with HMRC, unpaid debts, cashflow, wanting to close your business voluntarily, or one of the many other reasons you may need help, taking the first step and calling an Insolvency Practitioner is the best idea. But it is an understandably difficult step to take. You are potentially starting down a life changing road, so naturally there is going to be a lot to worry about, but there may be less than you think and worrying doesn’t really help.

The first question most of our clients want answering is whether they should call us in the first place.

The answer to whether you should contact us is simple. If you are reading this because you think you may need the services of an Insolvency Practitioner, then you should contact us. You are clearly worried enough to be thinking about insolvency so you definitely must do something. Remember, we are only of use to you if you need us. Insolvency advice is not a ‘saleable’ item like buying a tin of beans because it is only relevant when and if you need it. So, when you call us, before we do anything else, we will establish if you need us. If you don’t need us then great news, you got a free session that told you no longer need to worry. If you do need us, then what happens next is not as bleak as you would think. Here is an overview of how it works.

What happens after you contact us?

Firstly, let’s clear up a few misconceptions so that we are all talking the same language. When you contact us, unless you tell us otherwise, our first response is to help keep you in business. The bottom line is that we are not here to look for a way to close you down. A number of businesses that come to us can be rescued and our first approach is always to look for ways to keep you trading. That isn’t always possible, unfortunately, but closure is always a last resort.

Secondly, sometimes there is a little bit of confusion over terminology. We will always explain everything in plain English, but a few key words are good to know in advance. To simplify things down:

· Bankruptcy is only applicable to individuals. Sole traders for example.

· Insolvency is when you are unable to pay your debts. So, it is a global term usually used to describe the situation where your debts exceed your ability to pay them.

· Liquidation is where a company’s assets are used to pay off its debt(s).

· Administration is where an Insolvency Practitioner is appointed to try to rescue the business or chose the best course of action for a business which is insolvent.

When you speak to us on your free consultation, we will start by assessing your current situation. Depending on which of the above applies to you, (assuming they apply at all) we will work with you to decide the best course of action and your initial steps. Ideally they will be towards recovery.

The consultation will take place in a convenient way and location for you. Some of our clients prefer to come to see us or discuss on a private telephone call and others prefer us to visit them to get a feel for their business.

What is the first meeting really about?

This first part of the process is not about telling you what to do or criticising you.

· It is about collaboration and mutual understanding.

· It is about offering you the best option available.

· It is about working ‘with’ you.

· It is about building a working relationship help us achieve our goals.

· And, most of all it, is about practical solutions.

We will need to know about your business, why you think you need us, what your situation is overall and some other top-level information. Honesty is important of course but we are not here to judge. We are here to help.

There is a link at the end of this article to a video on our website where Gavin takes you through what happens when we first meet.

No business owner wants to face the prospect of having to put up the shutters and call it a day. Why would they? For most of us our business is our baby. It is something we have worked on, and usually in, with all our heart. Picking up the phone to call an Insolvency Practitioner is clearly going to be hard and we understand that. However, if you are in the position where you think your business may be facing difficulties, making the connection with us as early as possible will certainly be a more positive action than lying awake at night worrying.

So, our advice is, and will always be, ‘get in touch’. Call us, email us or however you feel most comfortable, but make that initial contact. Whatever the outcome of our first consultation, you will have a better idea of where you stand and most likely the start of a rescue plan - and that alone will relieve a lot of the stress and anguish.

Click here to see Gavin discussing what happens at your first meeting

Back

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The Insolvency Service produces monthly figures for both corporate and personal insolvencies and as mentioned previously, I rarely comment on them. Partly because insolvencies are seasonal, so generally increase in the first and third quarter of the year and decrease in the second and fourth quarter and partly because there is not much to talk about.

Latest Insolvency numbers are released for March 2021.

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The answer to the question ‘when is a good time to close your solvent business’ is never an easy one. However, with capital gains tax and asset disposal relief both still working in your favour, if you are looking to close your solvent business then 2021 or early 2022, may well be the time to make the move. If not, you could see a much less favourable tax landscape in the future.

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On 24 March 2021, the Government announced that it will extend several temporary measures brought in by the Corporate Insolvency and Governance Act (CIG) until 30 June 2021.

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Very quickly after the lockdown announcement, the Government released various schemes to help businesses. One of the options they released was to defer any VAT payments due between 20 March 2020 and 30 June 2020 and allow payment by 31 March 2021. Many businesses took this option because of the uncertainty at the time, but now another decision needs to be made. The Government has offered further help and so your options are as follows;

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I thought I would provide some thoughts on how the change may affect you because, despite the budget not quite producing the fireworks some were predicting, it did have a lot worth discussing in there.

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The Insolvency Service produce monthly figures for both corporate and personal insolvencies and to be honest I rarely comment on them. Partly because insolvencies are seasonal so increase in the first and third quarter of the year and decrease in the second and fourth quarter and partly because there is not much too talk about.
 
However, I feel that there is a clear trend and whilst on paper the trend appears to be good news it hides several issues which will hit the economy later in the year.

Company Insolvencies in January 2021 50% lower than January 2020, but is this good news?

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Smart Business Recovery is pleased to welcome a new member of the team

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Looking ahead isn't always easy but despite 2020 begin one of the most unusual years ever for many of us, there are some signs of stability ahead.

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Over the last few days, a number of extensions have been announced which it is hoped to assist business affected by COVID 19. These are as follows;

Government Extends various measures to assist struggling business

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Will I get my money? The order of payment for creditors.

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What’s left for you? What will the change to HMRC preferential creditor status really mean to SMEs?

Up until the early 2000s HMRC were a preferential creditor in cases of insolvency. When this changed in 2003 it was ... more

The Government Announces new rules regarding Pre-pack sales to be implemented.

The Government has announced that new rules will be brought into legislation as soon as possible. The following was ... more

Measures put in place to protect businesses from insolvency will be extended to continue giving them much-needed breathing space during the coronavirus (COVID-19) pandemic, the government announced today (24 September). UPDATED 27 November 2020

Government gives businesses much-needed breathing space with extension of insolvency measures

UPDATED 26 NOVEMBER 2020 The Government has announced extensions to previous temporary measures relating to ... more

Taking stock – Are your customers stock levels a threat to your cashflow?

There is a potential situation arising that could soon be causing some insolvency related issues, cashflow problems ... more

Changes to the regulations surrounding insolvency could spell trouble for SMEs. This article takes a look at what some of these changes are and the impact they could have on cashflow.

Supplier beware – Credit control and the Corporate Insolvency and Governance Bill 2020

Insolvency legislation rarely makes the news which is probably why one of the biggest changes to the way it works ... more

Dividends, Overdrawn Loan Accounts and Insolvency - Updated

This is a very common problem in insolvency and here is the reason why!! At some stage, a director of a new ... more

Keep your cashflow forecast up to date – 5 tips and 1 warning

Why then are we bothering to dedicate a full article and video to cashflow forecasts if they are so common? Well, ... more

Since the Covid-19 pandemic insolvency has been on the minds of many business owners. Pressing the panic button is unlikely to be the right response though.

Am I insolvent? – Why pressing the panic button may not be the best idea.

The initial shock of the lockdown. When the government announced the Coronavirus lockdown our telephone began to ... more

Bankrupt, Insolvent or in need of rescue?

What happens when you reach out to an Insolvency Practitioner? I doubt any business owner ... more

What are employees entitled to in an insolvency process?

One of the major aspects of any insolvency is what will happen to the employees. Any news story in relation to an ... more