When it comes to company insolvency, administrators are often given the unfair reputation as the bad guys. But they are actually a valuable resource, if you are in financial difficulty.
Who are they?
Many administrators use the title of insolvency practitioner (IP), which is a far more modern approach to the practice of debt administration. An insolvency practitioner is a licenced professional, who acts in relation to an insolvent individual or business. These normally tend to be an accountant or specialist in this area of law.
What does an IP do?
Whilst talking to an IP is a scary prospect, your fears are unlikely to realize. They are a useful port of call when you feel you need debt advice. The main role of an IP is to assist in a bad situation, trying to salvage what they can to allow the business or individual to carry on as normal; creating the metaphorical phoenix from the flames if you will!
So it's always the IP’s first role to salvage, not destroy. The IP typically looks after the interests of the creditors, but they do in most occasions strike a balance between the needs of the debtor with the repayment of the creditors.
When do they get involved?
Your creditors may have terms in their agreements that allow them to appoint an Insolvency Practitioner in situations of non-payment. The reason for this is primarily company analysis. A creditor needs all the facts to establish the best options and outcome for all involved.
They will ask questions such as: can the company pay its debts when they are due? If not, has a creditor served a winding up petition?
If a petition has been filed and is successful, the company is wound up by the court. Upon the winding up, an IP will be appointed either by the court or the creditor to conduct an analysis of the assets and liabilities, claims by the other creditors and a sale of the assets to provide revenue for the payment of the creditor’s outstanding debt.
This can also happen as an individual; if a creditor serves a statutory demand upon you, you have 21 days in which to make payment or they can proceed with a bankruptcy petition. If you are declared bankrupt, a Trustee in Bankruptcy will be appointed.
Alternatively an IP can become involved at your request. This can be either as an individual or a business, if you are struggling to pay your debts and have various creditors chasing you for payment. An IP can assist you in entering an Individual Voluntary Arrangement (as an individual) or a Creditors Voluntary Arrangement (in terms of a business).
These two vehicles work in a similar way and allow an IP to consolidate the debt, outline the assets and assist you in the drafting of a repayment proposal to be sent to your creditors. It is to be noted whilst an IVA or a CVA can be put forward, it has to be agreed to be at least 75% of the creditors. If this does not happen the arrangement will fail.
Get advice from an insolvency practitioner
If you feel that your company may benefit some advice from an Insolvency Practitioner, you can use the free Government “Find an insolvency practitioner” service. Alternatively, you may find the Insolvency Practitioners Association useful.