In my previous article about insolvency, I focused on the what being insolvent actually means and, the need to pull stakeholders together to agree a plan of action It might seem like there is a confusing web of options to consider but in this 3^rd article I untangle them by looking at them in more detail.

How can an Insolvency Practitioner help?                          

You may be feeling overwhelmed by the situation, especially if you’ve been spun a yarn about likely outcomes by well-meaning but ‘layman’ friends.

As an experienced Insolvency Practitioner, when appointed to represent you or your insolvent business, I act as an independent and impartial professional in the best interests of you or the company.

Your options will depend on your situation, but they may include:

• Rescuing the business – this may be possible if you seek help as soon as red flags begin to show, such as not having the funds to be able to pay debts when they are due and/or your liabilities are more than your assets.

I will gain a full picture of your situation and identify areas of concern. Then, together, we will create a plan to tackle the problem. This may involve business restructuring of operations, debts and other financial obligations such as renegotiating contracts, refinancing, downsizing, or implementing other strategies to restore profitability.

• Personal debt solutions – sometimes personal debt problems go hand-in-hand with business insolvency. Often, a business owner will have intertwined their own personal finances with that of the business and I see this happening with regularity, especially when the business has begun to suffer and the owner is desperate to find funding.

I can help you with options, explain the practical impact of each and guide you through the necessary legal and regulatory requirements.

• Creditor negotiations – negotiating with creditors (third parties who are owed money by the business) can be stressful and emotionally charged.

Acting in the best interests of your business, I may be able to negotiate with creditors to reach agreements on repayment plans, debt settlements, or debt write-offs, ensuring a fair distribution of available resources.

It is important to note that an Insolvency Practitioner cannot act on behalf of both the insolvent business and its creditors at the same time.

• Company Voluntary Arrangement (CVA) – this is a formal agreement between your insolvent business and its creditors.

The insolvent business proposes a repayment plan to repay its debts over a specified period. If the proposal is approved by creditors, the CVA allows your business to continue trading while repaying its debts in line with the agreed terms. It may be possible to do things like introduce new funders, so that the terms of the proposal allow for all creditors to be paid in full over a specific period. It is also possible for a director to request to modify the terms of a CVA once it is in place.

• Administration

Administration is a procedure designed to protect your financially distressed company from legal action by creditors while a solution is sought.

I would be appointed as an administrator to manage your company's affairs, with the goal of: rescuing the business as a going concern; or realising the company's assets (selling off assets for cash or other forms of payment) to achieve a better outcome for creditors than a liquidation.

• Liquidation

Liquidation (winding-up) involves the orderly closure of your company's affairs, realisation of its assets and distribution of the proceeds to its creditors. There are two main types of liquidation – a Creditors' Voluntary Liquidation (CVL), which is initiated by the company's directors and approved by shareholders and creditors – and Compulsory Liquidation, which is  winding up by the court by a petition presented by directors or shareholders or creditors..

• Bankruptcy

For individuals, bankruptcy may be an unavoidable outcome - but it can be the right solution and remove that feeling of being trapped and vulnerable.

• Individual/Company Voluntary Arrangement (CVAIVA)

A CVA/IVA is an agreement between a company or an individual with creditors to pay all or part of the debts. You agree to make regular payments to an Insolvency Practitioner such as myself, who acts as Supervisor of the arrangement and will distribute this money between your creditors. 

So now we have the options straightened out, remember that some will work for you, some won’t. Do contact me if you would like to discuss your situation.