An insolvency practitioner can be appointed by the court, and he will take over your business to recover your debts. If you become bankrupt, and do not want to run your business anymore then you can go for the voluntary liquidation, and you can appoint a liquidator over a meeting with your directors and stakeholders. But, if you do not pay your creditors on time then they can file a complaint against your company in court, and an insolvency practitioner will be appointed by the court to start the liquidation process of your company. He or she will report to the court only and settle the amounts claimed by your creditors after selling your business assets.
You can also contact an insolvency practitioner to take his suggestions, but you need to know the differences between an IP and broker. There are some brokers available who are working with such insolvency firms, and they can drag your company to an IP to earn some commission. You must check the license of an insolvency practitioner before you hire, and do not hire an IP after checking his online ads.
What is insolvency?
Directors of a company can take the decisions, and they are liable to pay the creditors. If the company is insolvent, then the directors need to clean the debts, and protect the interests of their creditors. Many people think that directors have to stop their trading when their company is insolvent. However, it is not true. You can continue your trading as a director once your company is insolvent. You need to trade at your own risk, and you must trade under a specific section of the law. For example, you can face serious legal troubles if your trade under the Wrongful Trading under Section 214 of the Insolvency Act 1986. In this case, you can appoint an insolvency practitioner, and he will examine the transactions made by the directors of your company during the insolvency period.
Apart from the selling your business assets, insolvency practitioners will examine the undervalue transactions done by your company. For example, if any asset of the company is sold at below their original value, then your IP professional will evaluate the same and ask for the reasons. Their main role is to pay the creditors and settle their claims. They will remove your company name from the public register once the insolvency process is done. In fact, an IP can make a report on the directors of the company, and their report can disqualify a director from his or her position.
You might have some doubts about the insolvency process, or when would you face such troubles in your business. If you have a proper cash flow, then you can easily pay your debts and settle the claims of your creditors. But, if you do not pay your creditors and suppliers on time and do not clear your VAT and other taxes, then your company could be insolvent.
No need to panic if your company becomes isolvent. You can still have some options available to save your company. You can hire an insolvency practitioner and take his suggestions. He will evaluate your assets and potential risks associated with your business. Along with that, he can suggest you to sell and clear your old stocks and assets that are not in use. This will help you to recover your debts easily. Along with that, an IP will talk to your creditors and try to convince them to protect your interests, and you can show some new investment ideas and trading options which will generate best ROIs. You can take some time from your creditors and settle their claims.
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