While a lot of creditors take the insolvency procedures of clients at face value, many do not understand the potential benefits of getting involved with an insolvency practitioner (IP) during periods of client insolvency.
With the majority of creditors giving up and writing off insolvent clients as bad debts, given a greater input from directors and a discussion with your local insolvency practitioner (IP) you can often get a lot more out.
If and when directors take a greater interest in cases, then there is a chance they will get more out as an end product. It’s that simple.
Appointing the right practitioner from the start will have major implications on any case, so it can be as simple as choosing a more flexible firm to maximise distributions as fees will likely be less than with the largest firms. Or just choosing a firm you know will take the time and effort to look into a business accordingly. All creditors have a say in who gets appointed in a case, it’s a simple process of filling out your voting form and contacting your preferred IP.
Once appointed some IPs are more experienced in looking through records for any discrepancies and may have a deeper understanding of what to look for to help you get what is owed back. There may be signs of directors continuing to trade whilst knowingly insolvent, this can be a major factor in increasing the potential distribution to creditors. If a director has knowingly been trading whilst insolvent there is a chance to increase distributions through involving their own personal finances. If a director can be found to have continued ordering stock whilst knowingly insolvent and could not afford to pay or continued to use stock within the manufacturing process they can be found personally liable. Although the obvious answer is to claim no knowledge of the situation, directors are expected to have a constant knowledge regarding their business accounts, ignorance is not a defence.
As a director with an insolvent client the rule of thumb is that the more you put in the more you will get out. If any business deals with a large number of insolvent clients then it’s wise to get in touch with a trusted insolvency practitioner and contact them regularly about cases. If you need help or advice regarding a client then do not hesitate to get in touch.