Insolvency | Hammersmith Chartered Accountants

Insolvency

The prevailing hard economic times have seen many business close doors. If you are running a business and it becomes insolvent, you will lose all your investment. Besides, continuing to trade while knowing that your business is insolvent can lead to a serious penalty. If you are in this situation, you need advice on the options available. This is where Hammersmith Chartered Accountants comes in. We are insolvency specialists. We have guided many businesses on financial, regulatory and legal implications of insolvency. Thus, we will happily help you.

Depending on the state of affairs, we may advise that you seek a voluntary arrangement. It will give your business a chance to pull your business out of the hard economic situation. We will advise on the most appropriate way to do this. It all depends on your special circumstances you find yourself in. Hammersmith Chartered Accountants has insolvency practitioners who are licensed to act on insolvent issues. We provide advice to companies, partnerships and even sole proprietorship. Our staff is well trained and ICAEW licensed

 

What we do:

If your business is going through a difficult financial situation we will help. If it is on the verge of becoming insolvent, or being liquidated our expertise will bail it out. Also, if it chooses voluntary arrangement we step in to offer valuable advice. A business that is considering going in to receivership, may need to consider our advice. Besides, if you are considering bankruptcy, you may still need to talk to us. It helps you to decide the next course of action. When you reach to us, our job will be to ensure that we rescue your business. If rescuing it is not possible, we will recommend that you consider selling the assets of the business.

We are aware that there could be many competing and conflicting interests. But, our work is to ensure that the interest of the business and creditors are considered first. However, we are aware that creditors can give all kinds of claims. So we will evaluate them and advice accordingly.

Liquidation

It is one of the paths we may need to consider for a company that is facing financial difficulties. Hammersmith Chartered Accountants, will offer you the right advice. This is important since it can help your business make the right decision. Our advice will revolve around:

Choosing the right liquidator

A liquidator is a person whose role is to help the business collect and sell its assets. They pursue any arising legal claims and pay dividends to creditors. But before we recommend the appointment of a liquidator, we look at other options. We consider injecting more capital in the business and negotiating with the existing creditors. Also, we may consider implementing restructuring strategies to help turn the business around. In some cases, we may consider voluntary administration.

We know that placing a business under liquidation can have serious consequences. So, we do the following:

Determine that the company is insolvent

We assess the company to find out if it cannot pay its financial obligations as they fall due. We have a checklist to guide us on this. The list contains the parameters that show when the company is insolvent. If the company is insolvent we advise on the way forward. In some cases, we may recommend that it should not trade. It helps to avoid being prosecuted. We will then advise on the following course of actions:

Liquidation – Once we assess the situation, we will decide whether liquidating the business could be the best way to go. We will embark on finding the best approach to use. This way, we limit the financial losses. Notice that our goal is to retain as many assets as possible. If the business is facing legal battles, liquidation puts a hold on the legal action. It stops creditors like suppliers, landlords, banks and HMRC from taking any legal action. It implies that the business will no longer be required to file VAT or annual accounts. Besides, it puts your liability as a director to a halt. Lastly, it enables the business access redundancy funds to pay directors and employees.

Administration– when the business is declared insolvent, it may be put under the management. This is the process that allows the administrator to all they can to rescue the company. We will advise on whether to consider requesting the court to put the business under administration. At Hammersmith Chartered Accountants we will advise on the IP to choose. The IP’s main role should try to rescue your company. They may do this by selling some of its assets to pay the amount owed to creditors. Also, the IP may last for long depending on the prevailing circumstances. If the amount to be collected is substantial, they may take a longer period.

Pre-pack option- it is the most popular method your business may need to consider. It is where the business’ assets are sold as negotiated. This may be done after the administrator has been appointed. We will advise whether this could work for you or not. Even though, it is the best option for employees and creditors.

Voluntary arrangement- the business may choose to enter into voluntary arrangement. Here, it gets into an agreement with the creditors to pay all or part of the debts. The job of the IP is to ensure that the agreed terms and conditions are met. The arrangement is ideal when the debt involved is more than £10,000. It is a better alternative to bankruptcy. The business commits itself to pay off part of, or all the debts over a defined period. In the arrangement, it may be agreed that a certain percentage of the debt be paid and the rest should be written off.

The voluntary arrangement comes with the following benefits:

  • You agree on the date the repayment will stop.
  • Allows the business to continue operating
  • It can be used to protect business’ assets

Administrative Receivership- Hammersmith Chartered Accountants will evaluate and assessyour business. We will then decide whether putting it into the hands of an IP is the best option. We also look at whether going the IP way is the best option. At this point, let us explain the difference between the administrator and receivership. The job of an administrator is to turn a struggling business into a profit making entity. But when a businesses is placed under receivership, the result is liquidation or resolution. Thus, administrative receivership is less popular since it results into liquidation. Normally, the option is pursued if the company breaches the existing agreement. If a security agreement is substantially breached, it forms a ground for the holder of the floating charge to appoint a receiver

Expectations

The appointed receiver is expected to realise the assets of the company. They use the proceeds to reduce the amount of money the creditor can lose. The receiver can do this in several ways. They may opt to continue trading to make it financially profitable before selling it. Alternatively, they may realise the company’s assets or sell the company as a going concern. Note that the administrative receiver is in full control of the company. They may decide to fire or hire employees or remove the directors.

Pros

The administrative receiver has the powers to turn around the business. It is a good thing for a company that is mismanaged. It protects the creditors from further loses. In some cases, it may recover the full amount owed.

Cons

Administrative receivership has many disadvantages. No wonder the UK government decided to remove it as a recourse for creditors. First, it strips and sells the company’s assets. This is to ensure that creditors receive their moneys. Those who don’t receive their money lose out. Second, the directors and employees can lose their jobs. So if your creditors want to appoint a receiver for your business, talk to us. Hammersmith Chartered Accountants will help craft a plan to help reduce the severity of their actions.