All businesses go through financial peaks and troughs, especially when it comes to cashflow. But where you are having a particularly hard time and there are serious concerns about your future viability, the time has come to seek professional advice. Our solicitors are here to advise you on your position and on your options for ensuring that, if your business does fail, you do not face personal financial ruin as a result.
The insolvency threshold
It often comes as a surprise to business owners to know that you only need to be unable to pay a relatively modest amount, at the time it falls due, in order to be at risk from a creditor petitioning for your winding up. In fact, for companies the threshold is £750 and for individuals it is £5,000.
By speaking to us as soon as financial difficulties are encountered, you can increase the chances of your business being able to stay afloat. Where a winding up is necessary, we can help ensure it is carried out in an organised way which protects your personal interests as fully as possible.
How our insolvency lawyers can help
Our insolvency lawyers can support you to take a realistic look at your business and its likely future prospects, so that an appropriate plan of action can be formulated.
Where you are experiencing temporary problems, from which you are likely to recover relatively quickly – and where your underlying business is otherwise sound – we can help you to talk to your creditors. Explaining the difficulties you are facing and trying to reach an agreement that affords you more time to pay the debts that are owed may enable you to get back on an even keel.
Conversely, where the issues you are dealing with are more ingrained and radical action is needed to bring you back from the brink, we can work with your accountant and an insolvency practitioner to look at business rescue options. In the worst-case scenario, we will advise on the steps that need to be taken to close your business down in an orderly way and to limit your exposure to personal risk.
Our insolvency services
Drawing on our extensive experience and expertise, we can advise you on:
- strategies for avoiding insolvency or bankruptcy where your business is in financial difficulty;
- the likelihood that your business can be rescued and the ways in which this might be achieved;
- how to deal with your landlord if they are threatening forfeiture or to take your rent deposit;
- the duties of company directors where a collapse into insolvency seems likely;
- what will happen if liquidation, administration or bankruptcy cannot be avoided;
- your obligations towards a liquidator, administrator or trustee in bankruptcy;
- your potential exposure to personal liability for business debts and options to reduce this;
- the defence of claims issued against you as a result of the failure of your business, including those which require you to make a personal contribution towards business debts; and
- the defence of director disqualification proceedings.
There are a number of steps that can be taken to save a financially distressed business. Each step will be geared towards providing you with some breathing space while you get your proposals formulated, aiming to either increase the term over which debts need to be repaid, freeze any interest that may otherwise accrue, reduce the amount that needs to be handed over or even see entire debt amounts written off. However, as most rescue plans need creditor approval, it is vital that you take advice to ensure that your plan is likely to be accepted and that you follow the correct process. Failing to do this could see your rescue effort fail before it gets off the ground.
The most common rescue options for companies are:
- a Company Voluntary Arrangement (CVA), which effectively gives you the chance to trade out of your financial difficulties;
- a ‘Time to Pay’ arrangement, where you are indebted to HMRC and it would help your survival chances if the money you owe could be paid off over a longer period of time;
- a ‘Pre-Pack Administration’, which in the right circumstances can enable you to start your business again, via a new company, and free of the debt that is currently weighing you down; or
- administration, where temporary control of your business is given to an insolvency practitioner who, while primarily there to protect creditors, may also be able to steer you out of trouble.
For individuals, possible options include Individual Voluntary Arrangements or Debt Relief Orders.
Unless a rescue plan is in place, there will be a real threat of insolvency if your business is unable to pay its debts as they fall due or if your assets are not sufficient to cover your liabilities.
For this reason, it is vital that you take legal advice as soon as you can and that you do everything you are required to do by law when faced with what is clearly the end of the road for your business.
For company directors, this includes ensuring that as soon as you realise insolvency cannot be avoided that you put the interests of creditors first, and that you do not authorise anything which could lead to you being required to make a personal contribution to help meet the debts owed.
Personal liability may arise where you are judged to have:
- breached your fiduciary duties as a company director;
- authorised the improper payment of a dividend or the repayment of a director’s loan;
- continued to trade the company even after you realised insolvency could not be avoided;
- carried on the business of the company with the intention of defrauding creditors;
- transferred company property to yourself, family members or other connected people; or
- failed to satisfy your obligations to HMRC in terms of PAYE or NI contributions.
You may also face liability where you have given a personal guarantee for company debts. And of course, where you run your business as a sole trader or via a traditional partnership you will always have personal liability for business debts as they will be treated as being your own.
By talking to us at an early stage, we can help to keep your personal risk exposure down.
Why choose Geoffrey Leaver Solicitors?
Our highly regarded dispute resolution and litigation team have extensive experience in advising business owners and company directors on insolvency-related matters; and in the vast majority of cases we handle, clients who come to us for help early enough are able to ride out their financial difficulties, or at least avoid extensive personal liability where business closure cannot be avoided.
To keep up with legal developments affecting your business, you may also like to sign up to receive our newsletter or visit our resource hub. You can also find out what existing users of our dispute resolution and litigation service think about us by reading our client testimonials.
What our clients say:
“You have done a brilliant job from start to end and provided the most efficient and professional service.”
For more information about how we can help, you can read testimonials from our dispute resolution clients
Chambers & Partners 2021 notes the team is well-respected and active on a wide range of contractual claims and commercial disputes, including unfair prejudice claims and fraud-related proceedings. Local and international clientele comes from a variety of industry sectors, and also includes private individuals and SMEs. One client commends the “proactive, engaging and considerate” nature of the team.
Chambers & Partners 2020 says ‘Well-respected team active on a wide range of contractual claims and commercial disputes, including unfair prejudice claims and fraud-related proceedings. Local and international clientele comes from a variety of industry sectors, and also includes private individuals and SMEs.’
Legal 500 2020 says ‘Geoffrey Leaver Solicitors LLP’s dispute resolution and litigation practice specialises in commercial property disputes, distribution and agency agreements, debt collection and director, shareholder and partnership disputes. Its work includes dealing with injunctions and freezing orders and work in areas such as insolvency, international trade and IT and e-commerce. Practice head Kenneth Stangoe, Trevor Coward, Guy Brooks and Richard Millard are the key contacts’
The Dispute Resolution & Litigation Team
Ken Stangoe Partner
Dispute Resolution & Litigation 01908 689307Ken is Head of the Department. He has over 20 years' experience as a commercial litigator, with a heavy focus on property disputes, including forfeiture actions and applications for relief, right of way disputes, rent recovery for commercial landlords, trusts of land, dilapidations claims, boundary disputes, rent and service charge recovery and lease renewal applications.
Richard Millard Managing Partner
Construction & Development 01908 689382Richard has over 20 years’ experience acting for clients in the construction industry, providing pragmatic advice to developers, contractors, sub-contractors, design and construction professionals, housing associations, smaller builders and homeowners.
Guy Brooks Partner
Dispute Resolution & Litigation 01908 689304Guy has more than 30 years’ experience in the legal profession and headed up the Commercial Litigation department of local firm Fennemores, before joining Geoffrey Leaver as joint head of the Dispute Resolution department in 2006. The Dispute Resolution department have been recognised by Legal 500 UK.
Trevor Coward Partner
Dispute Resolution & Litigation 01908 689311Trevor specialises in the closely connected fields of commercial litigation, partner/director disputes, insolvency, property litigation, and professional negligence. His background is one of broad experience across a wide range of commercial litigation. He is a member of Legal Counsel International, an alliance of lawyers in 17 countries.