Insolvency Solicitors

An insolvency solicitor provides legal advice and representation to individuals and businesses facing financial difficulties, including bankruptcy, liquidation, and administration. They assist with debt restructuring, negotiations with creditors, and court proceedings related to insolvency. They also advise on directors' duties and liabilities, and assist with the sale of assets to repay debts.

An example of insolvency would be a company that is unable to pay its debts as they become due, or whose liabilities exceed its assets. This could result in the company being forced into liquidation or administration, where its assets are sold to pay off creditors. Another example could be an individual who is unable to pay their debts and is declared bankrupt.

Insolvency is a situation where a business is unable to pay its debts as they fall due or has more liabilities than assets. It can lead to the closure of the business, liquidation of assets, and potential legal action against the directors. there are various insolvency procedures available, such as administration, liquidation, and company voluntary arrangements, to help businesses in financial distress.

The different types of insolvency procedures available for businesses are administration, liquidation, company voluntary arrangement (CVA), and individual voluntary arrangement (IVA). Administration is a process where a company is placed under the control of an insolvency practitioner to restructure and save the business. Liquidation is a process where a company's assets are sold to pay off its debts. CVA is a process where a company agrees to pay its creditors over a period of time. IVA is a process where an individual agrees to pay their debts over a period of time.

A business is considered insolvent if it is unable to pay its debts as they fall due or if its liabilities exceed its assets. This can be determined by conducting a cash flow analysis and reviewing the company's financial statements. the Insolvency Act 1986 provides guidance on the definition of insolvency and the procedures for dealing with insolvent companies.

If a business becomes insolvent, the directors may face personal liability for the company's debts. They may also be disqualified from acting as directors in the future. The business may be liquidated, and its assets sold to pay off creditors. The reputation of the business and its owners may also be damaged.

The steps involved in a formal insolvency process are as follows:

1. Appointment of an insolvency practitioner: The first step in a formal insolvency process is the appointment of a licensed insolvency practitioner (IP) who will act as the administrator or liquidator of the company.
2. Investigation and assessment: The IP will investigate the company's financial position and assess the options available to maximize returns to creditors.
3. Notification of creditors: The IP will notify all creditors of the company's insolvency and provide them with details of the process.
4. Creditors' meeting: A meeting of creditors will be held to discuss the company's financial position and the proposed course of action.
5. Administration or liquidation: Depending on the company's financial position, the IP will either administer the company to help it restructure and continue trading or liquidate the company and sell its assets to pay off creditors.
6. Distribution of funds: Once the assets have been sold, the IP will distribute the funds to the creditors in accordance with the priority of their claims.
7. Closure: The final step in the formal insolvency process is the closure of the company, which involves deregistering the company and notifying relevant authorities of its closure.

Yes, a business can continue to trade during insolvency but it depends on the type of insolvency procedure being used. In some cases, such as administration, the business can continue to trade while a plan is put in place to repay creditors. However, in other cases, such as liquidation, the business will cease trading and its assets will be sold to repay creditors.

A business facing creditor pressures and demands during insolvency can seek the assistance of an insolvency practitioner who can help negotiate with creditors and develop a repayment plan. The business can also consider entering into a Company Voluntary Arrangement (CVA) or administration, which can provide protection from legal action by creditors while a restructuring plan is developed. It is important to seek professional advice and act quickly to address creditor demands.

There are several options available to rescue a financially distressed business including negotiating with creditors, restructuring the business, entering into a Company Voluntary Arrangement (CVA), or filing for administration or liquidation. Other options may include seeking financial assistance from the government or private investors, or selling the business to a new owner. The best course of action will depend on the specific circumstances of the business and its financial situation.

Directors can be held personally liable for the debts of a company in an insolvency situation if they have acted negligently or fraudulently. This can result in legal action being taken against them, including fines, disqualification from acting as a director, and even imprisonment. Directors must ensure they act in the best interests of the company and its creditors to avoid personal liability.