If you are struggling financially, whether you’re a business or an individual, it could be that you need to declare insolvency. At BRI Business Recovery and Insolvency, we understand how daunting this can be. Here’s a simplified overview of how to declare insolvency in the UK for companies.
If you are seeking advice and support for insolvency, contact our team today.
What is Insolvency?
Insolvency occurs when a business or individual can no longer pay their debts when they fall due, or when liabilities exceed assets. Declaring insolvency can feel overwhelming, but it is often the first step toward resolving financial difficulties and protecting creditors’ interests.
How to Declare Company Insolvency
If you’re a company director and believe the business is insolvent, it’s essential to act quickly and responsibly. The following steps apply:
1. Seek Professional Advice
Contact a licensed insolvency practitioner (IP), like BRI, immediately. They will review your financial situation and advise on the most appropriate insolvency route.
2. Assess the Financial Position
The IP will determine whether the company is insolvent based on cash flow (inability to pay debts as they fall due) or balance sheet (current and contingent liabilities exceed the company’s assets).
3. Choose the Right Procedure
Depending on the circumstances, the IP may recommend:
- Creditors’ Voluntary Liquidation (CVL): Common for closing insolvent companies and distributing assets to creditors.
- Administration: Protects the business from legal action while assets are sold or the company is restructured.
- Company Voluntary Arrangement (CVA): Allows the company to repay debts over time while continuing to trade.
At BRI, we specialise in each of these procedures, so you can rest assured we have experience and are here to help you. In addition, our approach is to first consider alternative options available before proceeding with a formal procedure.
4. Prepare the Required Documents
You will need to provide financial records, including a statement of affairs, creditor lists, and details of company assets and liabilities. We can help you ensure you have gathered all the correct information.
5. Begin the Process
Once the process begins, the IP will notify creditors, handle legal filings, and take control of the company’s affairs, including the sale of assets and communication with stakeholders.
Once you have enlisted the help of an IP, they will be able to walk you through the other steps required as a result of declaring insolvency. The earlier you seek support and advice, the better, so please don’t hesitate to contact us.
How to Declare Personal Insolvency
If you are seeking to declare personal insolvency, the options are different.
If you are an individual in financial difficulty, insolvency options include:
- Bankruptcy: A formal process where assets may be sold and debts written off, typically after 12 months when the individual receives their discharge from bankruptcy. Being discharged doesn’t mean the bankruptcy has been concluded.
- Individual Voluntary Arrangement (IVA): A repayment plan managed by an IP over an agreed period of time, which is commonly up to 5 years.
- Debt Relief Order (DRO): A low-cost solution for individuals with low income, low assets, and smaller debts.
Again, once you have enlisted an IP, they will help assess the most appropriate option based on your situation. There are various other options that may be available in addition to these procedures mentioned above.
After Declaring Insolvency
Once insolvency is declared:
- Creditors are formally notified, and legal action usually stops.
- The IP takes control of the process, manages assets, and distributes any funds recovered to creditors.
- For directors, acting early and responsibly helps avoid legal complications and allows for an orderly financial exit.
Get Help with Insolvency Today
If you’re unable to meet financial obligations, don’t wait. Declaring insolvency is a structured, legal process that can provide relief and a fresh start. Contact our expert team today for confidential advice and practical support.
The sooner you seek help and support, the better, so please don’t hesitate to contact us today. Our friendly team are here to help.