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Look before you leap

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17 January 2022: Prospective new clients are often surprised when we tell them that they don’t, or shouldn’t, want our services. Their reaction is considerably magnified where they have already spoken with another Insolvency Practitioner (“IP”) who was happy to sign them up for a liquidation or other insolvency procedure. The devil, as always, is in the detail.

In these pandemic effected times, many directors that have always done quite well thank you very much, now find that despite Government support, they are carrying debts built up during the pandemic. Although they may have positive trading forecasts for the future, it may not be sufficient to meet ongoing costs as well as the historic debts. Such directors may now have to consider the word ‘insolvency’ and its implications for the first time.

To establish the best outcome, looking into what liabilities there are and what, if any, other security those creditors might hold is an important additional step to take – have the directors guaranteed any of them? Yes, you can be quite confident any bounce back loan or CBILS are not personally guaranteed (subject to the £250k limit), but are the directors sure the funds were applied for and used correctly and what about everything else?

The bank, other loans, factoring, lease agreements, the landlord (is the lease actually in the name of the director(s) and not the company?). The consequences of pulling the plug may be far worse than the consequences of carrying on. If all the IP is interested in is another job for themselves, then will they want to look beyond the wood and see the trees?

Sometimes the directors are, themselves, creditors and there may be actions they can take, e.g. repaying loans rather than taking salary (whilst being mindful of potential preference issues), which will help steady the course through the choppy waters.

As we always say, you want the best advice for your clients, not just another job for the IP – talk to BRI and get the right advice first time, every time.