Business insolvency means the inability of a business to pay off its debts. This is either because a business is unable to pay its debts when they are due or the businesses liabilities exceed their assets.
If your business is insolvent you need to take immediate action so that the situation does not get any worse. If you are a Director you have a responsibility for your liabilities so you need to take the right actions to ensure that you are not held personally liable for the businesses debts.
You need to contact a licensed firm of insolvency practitioners to show that you are acting in the best interests of your creditors.
The role of an Insolvency Practitioner
An insolvency practitioner will work with you to try and turn your business around. There first task will be to help produce an Individual Voluntary Agreement. This is a legally binding agreement between you and your creditors. The agreement allows you to make reduced payments to your creditors until your debt is paid off in full.
Your creditors get to vote for or against the agreement, but you only need one creditor to vote for it for it to be approved. However if one of your creditors forms more than 25% of your debt and they vote against it then the agreement will be declined.
The insolvency practitioner will work with you for the duration of the payment term to ensure that your business and financial position are stable and that you are making the agreed payments. You make the payments to the insolvency practitioner and they then distribute the money to your creditors in accordance with the agreement.
At the end of the payment period, once all payments have been made, then the outstanding balance will be written off, this will signal that you are solvent again.
Whilst you made contact with the insolvency practitioner to initiate the process, they will work for you whilst drawing up the agreement, however once it is drawn up they will work on behalf of the creditors until the debts are paid. There role is to agree the payment terms and make sure you stick to them.
Personal Debt Advice and the role of an Insolvency Practitioner
In the event a limited company faces closure and personal guarantees comes into effect a director may find himself seeking personal debt advice. An Licenced Insolvency Practitioner can advise on an IVA or personal bankruptcy a method for dealing with unmanageable debts.
If you think you may be insolvent or think you may need an insolvency practitioner it is a good idea to get some advice. You could contact a business turnaround specialist and insolvency practitioner, as they are experienced in dealing with businesses in or facing insolvency. They will be able to explain all the options available to you, plus the risks and benefits of each choice, they will also be able to help you put your chosen plan of action in place.
To understand the whole range of options and to get help choosing the right one for your business contact us on 0800 597 4757 or enquire online using the form opposite.
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