Frequently Asked Questions

What happens to Crown (VAT, PAYE, NIC & Corporation Tax) debt in insolvency?

The HMRC are an unsecured creditor. If funds remain after secured creditors have been paid, unsecured creditors receive a distribution proportional to their outstanding debt. All remaining debt is written-off including taxation.

What is a secured creditor?

A secured creditor is a lender with enforceable rights of ownership over property in the event of default. Normally all financial (bank & factoring) lending is secured, firstly on the assets of a business & secondly by the personal guarantees of Directors on their own assets. In the event of insolvency secured lenders will pursue repayment; however personal bankruptcy concludes all obligations should this be an outcome.

A secured creditor normally has the right to appoint their choice of Insolvency Practitioner. The security element of borrowing is not always made explicit by lenders at point of sale.

Is my business insolvent?

A business may be declared insolvent if either of three tests applies:

  1. It is unable to pay its debts as they fall due;
  2. Its assets are worth less than its liabilities;
  3. It has not satisfied a Court demand by a creditor.

The discretion of business owners is important to determine solvency e.g. the realisable value of assets may deteriorate due to market changes or outstanding debts may be uncollectable. Your view of the current value of assets takes priority over historic “book values”.

It is not illegal for a business to trade whilst insolvent. Directors may however become personally liable for debts if a “trade-out” subsequently fails & misconduct charges if these cannot subsequently be made good.

What is a negative balance sheet?

A balance sheet is the corporate equivalent of net worth. If it does not balance then a company’s liabilities are greater than its assets; it is technically insolvent. When a company is in this condition its creditors are exposed to default risk & its Directors to personal liability issues.

It is strongly recommended that you contact us before submitting any “qualified accounts” to Companies House.

What does an Insolvency Practitioner do?

The role of the Insolvency Practitioner is to:

  1. Define what money is owed to creditors;
  2. Realise the assets of the business;
  3. Make payments in an order of priority to creditors;
  4. Report on the conduct of the officer holders of the company;
  5. Wherever possible facilitate business recovery.

An IPs primary obligation is to your business creditors. For this reason you are advised to seek independent advice on your personal position. Doing this prior to appointment may affect your choice of IP.

Why use Cromwell Seymour LLP?

  • Our priority is to defend your personal income & net worth;
  • We assist you onsite & by ‘phone throughout negotiation with banks, professionals, creditors, landlords, employees, courts, shareholders & family members. Our knowledge of precedence accelerates reaching agreement & improves the outcome for all stakeholders;
  • Our “packaged” proposals can be dealt with efficiently by IPs across the country. This permits fixed fee market rates & avoids “re-appointment” risks by selection of an IP acceptable to your secured creditors;
  • Our company structure is cost-effective & accountable to you via the Financial Ombudsman Service.

Can I continue to pay & employ staff?

Yes, Transfer of Undertaking & Protection of Employment (TUPE) may require that all existing employment rights are protected in the new company.

Can I keep my existing phone lines & website?

Yes, this is all transferred to the new company in the sale of assets and goodwill. For companies undertaking a CVA there is no change.

Can I keep my existing bank?

At the present time RBS Group (incorporating of NatWest & Ulster Bank) does not allow bank accounts for phoenix companies. Where required we assist in opening a bank account with a high street bank.

How long does it take?

If there is financial pressure a pre-pack CVL can be swiftly accomplished subject to debenture holders’ consent. Alternatively a CVA Moratorium can protect the company within hours.

How much does it cost?

Your costs will be significantly less than the amount of debt that you will be writing off. Part of our service is to estimate the value of any assets (this remains subject to an independent valuation). Our fees will be negotiated up front as each case is different.