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.
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.
A business may be declared insolvent if either of three tests applies:
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.
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.
The role of the Insolvency Practitioner is to:
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.
Yes, Transfer of Undertaking & Protection of Employment (TUPE) may require that all existing employment rights are protected in the new company.
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.
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
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.
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.