When a company is failing, it is usually the directors who approach a licensed insolvency practitioner for advice and guidance on what they should do next. However, an insolvency practitioner can also be appointed by a creditor or the courts.
The party who initiates the insolvency process is the one responsible for paying the fees, and if it is a creditor who begins insolvency proceedings against a company, the director will be served with a winding-up petition.
Why you should contact an insolvency practitioner
While a lot of creditors take the insolvency procedures of their clients at face value, many don’t understand the potential benefits of contacting an insolvency practitioner if your client is facing insolvency.
In fact, the majority of creditors tend to give up and simply write off insolvent clients as bad debts – however, all it takes is a discussion with a local insolvency practitioner to get back at least some of the money you are owed.
Basically, if and when directors take a great interest in insolvency cases, there is a very real chance that they will get more out as an end product. It’s as simple as that!
Your right to appointing an insolvency practitioner
Appointing the right licensed insolvency practitioner from the start will have major implications on any case.
It could be as simple as choosing a more flexible firm to maximise distributions as fees, or just choosing a firm that you know will take the time and effort into looking into a business accordingly.
All creditors are entitled to have a say in who gets appointed in a case. It’s a simple process of filling out your voting form and contacting your chosen insolvency practitioner. So, if you have an insolvency practitioner you would prefer to use, it’s important to have your say.
What happens next?
Once appointed, an experienced insolvency practitioner will have a deep understanding of what to look for to help you get back any monies that you are owed. They will most likely begin by looking through records for any discrepancies.
For example, any signs of company directors continuing to trade whilst knowingly insolvent can be a major factor in increasing the potential distribution to creditors.
Essentially, if a director has knowingly been trading whilst insolvent, there is a chance to increase distributions through involving their own personal finances.
This is because if a director can be found to have continued ordering stock, or continued to use stock, whilst knowingly insolvent and could not afford to pay, they can be found personally liable.
Of course, the obvious solution here is to claim that they had no knowledge of the situation, but it is a director’s duty to have a constant knowledge of their business accounts and what is going on financially – so ignorance is not a suitable defence.
Find out more about wrongful trading in insolvency here.
How McAlister & Co can help
If you are a director with an insolvent client and are owed money, the general rule of thumb is that the more you put in, the more you will get out.
If you need help or advice regarding next steps when dealing with a client who is facing insolvency, then do not hesitate to get in touch with McAlister & Co today.
As one of the leading licensed insolvency practitioners in the UK, there is nothing we don’t know about business insolvency. So, for help and confidential advice, be sure to reach out to our team.