What is a licensed Insolvency Practice and how can one help your business?

What is insolvency?

Insolvency is something of a dirty word in business. In many people’s eyes, it’s a byword for failure, perhaps even for financial mismanagement.

Of course, if you run a business and have the spectre of insolvency looming over you, it’s a serious situation. It literally means you cannot pay your bills and you have creditors chasing you for debts. The end game is legal action to stop your company trading so its assets can be seized and shared between the people you owe money too.

None of this is to be taken lightly. But there is another side to it all. Insolvency isn’t just being unable to pay your debts. It’s also a formal set of procedures governed by rules and regulations. 

The purpose of insolvency

The purpose of formal insolvency proceedings is to mediate between the interests of both parties, the debtor and the creditors. So yes, the ultimate aim is to help creditors get back the money they are owed. But at the same time, the insolvency process is structured to do everything possible to save a struggling business from going under.

When you’re staring into the abyss unable to pay your debts, insolvency doesn’t necessarily mean the end of the road for your business. Formal insolvency proceedings might be your best hope of getting back on track.

What does a licensed insolvency practitioner do?

The insolvency process is managed by licensed insolvency practitioners (IPs). These are qualified and certified professionals who usually work for accountancy firms or else specialist insolvency practices, like JT Maxwell. 

IPs and specialist insolvency practices are closely regulated because of the sensitive nature of the work they do. Their role includes:

• Working with businesses that find themselves in acute financial difficulties, providing advice on debt restructuring and financial management.
• Liaising with creditors to come to an arrangement on debt repayments.
• Acting as nominee and supervisor in Company Voluntary Arrangements (CVAs), a formal debt repayment agreement governed by insolvency laws.
• Acting as an Administrator in circumstances where an insolvent company is sold to keep it going.
• Acting as a Liquidator in cases where insolvent companies are wound up and their assets used to repay creditors.

How can a licensed insolvency practitioner help your business?

The primary aims of an IP are:

1. to save the struggling company and
2. resolve outstanding debt issues through negotiation between the company and its creditors (including formal processes like CVAs).

Only when it becomes clear that those two aims can’t be achieved do things move forward towards administration and liquidation.

So while insolvency is a scary place to be, firms should be reassured by the fact that an IP is legally bound to act in their best interests. They are not only experts in insolvency law, they are also specialists in debt management, financial restructuring, negotiations and more. Their aim is to resolve your debt issues without the need for administration or winding up petitions.

An IP also acts as a buffer between you and creditors who may be ready to make statutory demands for payment. Once appointed, an IP will handle all relationships with creditors on your behalf, negotiating to get the best outcome for all parties.

In short, while to many people in business the idea of declaring your business insolvent is an absolute last resort, it’s better to act sooner rather than later. Contacting a licensed IP in the first instance doesn’t have to amount to you filing for insolvency. At JT Maxwell, our first step is to offer free and impartial advice based on your current circumstances, to help you make the best decision for the future of your business.

Is your business in financial hardship?

If you are struggling to pay your bills, don’t delay. Enquire with JT Maxwell's team today through the 'Company Debt Help' search and take your first step on the road to recovery.

 

Blog by JT Maxwell >>