FAQ

Insolvency occurs when a company cannot meet its financial obligations as they come due. This situation not only stresses the business operations but also imposes legal obligations on the directors to act in the creditors’ best interests. Recognizing insolvency early can help directors take necessary actions, such as consulting with an insolvency practitioner, to mitigate the situation.

1. Inability to Pay Bills on Time: When a company starts struggling with cash flow to an extent that it cannot pay its employees, settle invoices on time, or meet obligations to HMRC and other creditors, it’s a clear sign of distress.
2. Directors Unable to Draw Salaries: If directors cannot withdraw their regular salaries due to lack of funds, it indicates a severe liquidity issue within the company.
3. Subsidizing Company Costs: Directors who find themselves using personal funds to cover company expenses are witnessing direct signs of a failing financial structure.
4. Delayed Payments from Clients: Consistent delays in receiving payments can drastically affect the operational cash flow, leading to insolvency.
5. Decline in Client Base: A significant reduction in clients, coupled with the inability to engage new ones due to financial constraints, particularly in marketing, indicates a weakening business model.
6. Redundancy Challenges: The inability to afford redundancy payments while struggling to meet payroll is a critical indicator of financial instability.
7. Pessimistic Financial Forecasts: If a director believes that there is no improvement in sight for the business’s financial health, immediate action is required.
8. Anticipated Debts from Tax Obligations: Expecting that the next tax filing will result in unaffordable debt is a tell-tale sign of impending insolvency.
9. Cessation of Trading: Stopping business operations while having outstanding debts is often the final stage before declaring insolvency.

Understanding the signs of insolvency and recognizing when to bring in a professional can make a significant difference in the outcomes for a troubled business. An insolvency practitioner offers not just a pathway to compliance with legal obligations but also a potential lifeline to recovery.

For business owners facing these challenges, timely action is essential. Recognizing the signs and seeking advice from a qualified insolvency practitioner can provide the guidance needed to navigate through financial adversities effectively.

An insolvency practitioner (IP) is a professionally licensed individual who specializes in dealing with financially distressed businesses. Their role is multifaceted:

• Assessment: IPs assess the financial state of the business to determine the most suitable course of action.
• Advice: They provide expert advice on how to address the company’s debts, which may include restructuring, negotiating with creditors, or formal insolvency procedures.
• Administration: In cases where recovery isn’t feasible, IPs manage the liquidation process, ensuring that assets are distributed fairly among creditors as per legal priorities.

Consulting with an insolvency practitioner should be considered when any of the above signs become evident. Early consultation can sometimes prevent formal insolvency, allowing the business to recover through restructuring or negotiated agreements with creditors.

In the complex world of business, financial difficulties can sometimes lead businesses into insolvency. Recognizing the early signs of financial distress is crucial for taking timely action and potentially salvaging the business. This article discusses the indicators of insolvency and explains the vital role of an insolvency practitioner in navigating these challenging situations.

Some IPs do charge less, as little as £2,400.00 in some cases BUT the director has to be wary of these companies. Due to the costs associated in closing down a LTD company, it’s not commercially viable for an IP to charge such little amounts.

Directors can use a third party but companies charging that level of fee will have their case open for months on end whilst they run fine tooth comb investigations into their business bank statements and their conduct as a director. If they find any misappropriation of funds, you will be forced to pay. What may seem like a cheap fee upfront can very quickly become expensive.

If you’re looking for security and transparency so you know exactly where you stand from the word go, you should consider using our service. It’s important to know where you stand and how this process might end up for you, with no surprises.

It’s your choice, but if your accountant has given you good service, why change?

No, we make a request for the last set of filed accounts and as part of our process we run a “deficiency account” which is all that is required.

Yes, the new company will be separate from the old company, and will need its own bank account, but a new company can be formed by filling in a 5 minute application online and there is the ability to open a bank as part of the formation

No, the Court does not need to be involved.

No. If you are under pressure before formally entering liquidation, we can take authority to contact chasing creditors on your behalf. Formal circulars are sent when entering liquidation, but we remove all stresses from the Director as part of the process.

No. Entering liquidation is not linked to your personal credit file.

No, the process changed some years ago and creditors are written to and given financial information without the need for a meeting.

Yes, a Liquidator is obligated to conduct an investigation of why the company failed, but in the majority of cases this does not result in any actions being taken against the director.

A company can be put into Liquidation in 3-4 weeks, after you provide all of the information needed for creditors, and pay the agreed fee. The Liquidation can be completed in as little as 6-7 months.

No, the Liquidator takes over all of those responsibilities.

The Liquidator will take control of all remaining assets and sell these if the director has no interest in purchasing these. In the case of Book debts, these are collected in by the Liquidator. These monies will be paid to creditors after the Liquidator takes an agreed fee.

If the company does not have the cash at bank to cover those costs, the Director will need to pay the agreed fee on its behalf. In almost all cases, the cost of liquidation is far less than the outstanding debts held by the company.

A Company Voluntary Arrangement (CVA) usually lasts between 2 to 5 years, depending on the terms agreed upon by the creditors and the company. The specific duration is determined by the company’s ability to repay the agreed portion of its debts over time. Once the agreed period has been completed and the payments have been made, the remaining debts are written off.

No, not all creditors need to agree to the CVA for it to be approved. For a CVA to be accepted, 75% (by debt value) of voting creditors must approve the proposal. Once the CVA is approved by the majority, it becomes legally binding on all creditors, even those who voted against it or did not vote at all. This ensures that the company has a manageable debt repayment plan without requiring unanimous creditor agreement.

If a company fails to meet the terms of the CVA, the arrangement may fail. In such cases, creditors can take further legal action, such as petitioning for liquidation or administration. Typically, the insolvency practitioner overseeing the CVA will try to renegotiate with the creditors or find alternative solutions. However, continued non-compliance may lead to the company being wound up.

A CVA offers several key advantages over liquidation, including:

• Continued Trading: The company can continue trading, retain employees, and maintain its client base.
• Debt Repayment Flexibility: A CVA allows the company to repay debts over time, usually resulting in a reduction of overall debt.
• Avoidance of Liquidation: It prevents the company from being wound up, allowing for the possibility of recovery.
• Creditor Protection: Creditors are legally bound by the CVA, meaning they cannot pursue further legal action against the company as long as the terms are met.
• Less Negative Impact: A CVA is generally viewed more positively than liquidation, preserving the company’s reputation and helping it rebuild in the future.

The money you are owed will sit as a debt alongside the other debts of the company.

Should staff be made redundant when the company closes, redundancy claims can be made to the Redundancy Payments Service. These payments are made by the government and not by the Director. There are times that directors can also make claims but this can only be handled once the company enters formal liquidation.

10 minutes. At this stage our information request is simple and most of the information can be found on your phone or at home/office.

Photo ID and Proof of Address: PICTURE OF PASSPORT / DRIVING LICENSE & A HOUSEHOLD BILL

Accounts, Tax returns: YOU WILL HAVE THESE IN EMAIL FORMAT FROM YOUR ACCOUNTANT

Bank Statements: PDFs CAN BE SENT STRAIGHT FROM YOUR BANKING APP

Proof of Debts: EMAIL SCREEN SHOTS AND PICTURES OF LETTERS ARE ACCEPTABLE

Any further information required can be collected during the process but this is sufficient for this stage.

It may be possible to transfer this to the new company, or else the Liquidator will probably disclaim the lease and it is handed back to the Landlord.

Vehicles and other leased assets are not owned by the closing business, the finance company own these. When the company enters liquidation, the liquidator will release a document to the finance company to disclaim any interest. This then allows the Director to discuss transferring the lease to their new company. In most cases, this is a very simple process.

The company will be removed from the register at Companies House approximately 3 months after the Liquidation has been concluded

No. We have no requirement to contact current employers.

A director can leave their company dormant and it’ll likely be struck off by a creditor. However, if they allow this to happen their conduct as a director will be investigated by the insolvency service. When they investigate the director, if any fraudulent activity has taken place (common cases are where a director allowed the company to be stuck off knowing they had creditors) the insolvency service WILL look to issue a compensation order which will move certain company debts into a personal debt. Over and above, a director might face a long-term ban of being a director and in some cases directors will face jail time.

Revolution RTI are able to act as a safeguard for directors, they can put their trust in us knowing we will have their interest in mind when doing our investigation work and closing their company.

Directors need to follow the genuine advice and guidance that we offer. We allow the director to maintain control of their situation as opposed to leaving it in the hands of the insolvency service. Yes, there is a fee involved which is ultimately a fraction of the price that a director would have to pay if the compensation order is issued.