FAQs

Yes. We offer a free no obligation meeting to discuss you or your client’s circumstances and how we can help you. Call 0208 444 3400 or fill out our contact us form to find out more.

Our website provides a basic outline of the process of placing a company into Liquidation. However, for more in-depth information, please call us for a free confidential initial advice on what the best option is for you. Our number is 0208 444 3400.

You are insolvent when you cannot pay debts as they fall due, or when your total assets are worth less than your total liabilities. The first is often referred to as ‘cashflow insolvency’ and the latter is often referred to as ‘balance sheet insolvency’. Even if a business is profitable, it does not necessary preclude the possibility of it being insolvent.

A company can be insolvent because of a shortage of cash even while profitable, for instance when customers fail to settle their debts to the company, or when the company over-invests in marketing or equipment at the wrong time.

These factors may mean that the company is unable to repay debts as they fall due, even though the business is otherwise healthy. You should seek insolvency advice as soon as there are signs the business may be insolvent.

Trading on in the hope that things level out is a common mistake. It is not wrongful trading by itself, but it can become wrongful trading. Wrongful trading is a narrower test under sections 214 and 246ZB of the Insolvency Act 1986. It applies where the company goes into insolvent liquidation or administration, and a director knew, or ought to have concluded, that there was no reasonable prospect of avoiding that, but carried on anyway. A director who took every step they ought to have taken to reduce the potential loss to creditors has a defence. It is a civil claim. If it succeeds, the court may order the director to contribute personally to the company’s assets. The risk grows the longer the position goes unaddressed, which is the real reason to take advice early.

Once a company is insolvent, or insolvency becomes probable, you must consider the interests of creditors as a whole and give them proper weight alongside the shareholders’ interests. That weight grows as the position worsens, and once insolvent liquidation or administration is unavoidable, creditors’ interests come first. You should work to avoid worsening their position.

You should seek insolvency advice as soon as there are signs the company may be insolvent. Taking advice early, and acting on it, widens the options still open to you and is one of the clearest ways of showing you took the position seriously if your conduct is examined later. If it appears that cash-flow problems will be manageable in the long term and it is just for the time being that you are unable to repay creditors, you may be able to arrange additional financing like taking out a loan, chasing debtors, or selling assets which are non-essential to the business. It is also possible in some cases to come to a compromise agreement with creditors by revising terms of payment.

Creditors will normally be more inclined to agree this when they are aware that the alternative may be an insolvency procedure in which they receive less or nothing at all. You should investigate all alternatives which are available and take appropriate steps before creditors take legal action against you.

A winding-up petition is an application to the court for the compulsory liquidation of a company. It is usually presented by a creditor, though the company, its directors or, in limited cases, its shareholders can also present one. It is the most serious action that can be taken against a company by creditors.

The petition costs a non-negligible sum of money to file and hence implies a serious motive on the part of the creditor to have the company liquidated in order for them to recover their debt. A creditor owed more than £750 can first serve a statutory demand. If the company does not pay it, or secure or compound it to the creditor’s reasonable satisfaction, within 21 days, the company is treated as unable to pay its debts. A creditor can also petition without a statutory demand if it can prove in another way that the company cannot pay its debts, for example where the creditor has tried to enforce a court judgment and the debt is still not paid in full.

As soon as a winding-up petition is received, it is imperative that the directors seek immediate advice from a licensed Insolvency Practitioner. The easiest option is to give us a call on 0208 444 3400 or request a call back via our contact us form. Our initial consultations are free and could prevent you from having legal action taken against you.

A statutory demand is a formal written demand for payment. These rules apply in England and Wales. A statutory demand against a company needs a debt of more than £750, and it is usually a step towards a winding-up petition. A statutory demand against an individual has no minimum debt, but the bankruptcy petition that may follow needs debts totalling at least £5,000. Either way the demand gives the debtor 21 days to respond.

Paying the demand in full within 21 days, or securing or compounding it to the creditor’s reasonable satisfaction, answers the statutory demand. A part payment does not rule out a petition: a company creditor can still petition on other proof that the company cannot pay its debts, and a bankruptcy petition can rest on debts totalling £5,000 or more, including a joint petition by several creditors. An individual served with a statutory demand can also apply to court to have it set aside, normally within 18 days of service. A company cannot: a company that disputes the debt may need to ask the court for an injunction or other relief to stop winding-up action, depending on the stage, and can oppose a petition once it is presented. If the company or individual wishes to repay the creditor but cannot afford to do so and to protect themselves from further legal action, an advisable course of action may be to arrive at some kind of arrangement through a CVA in the case of a company or an IVA in the case of an individual.

For more information give us a call on 0208 444 3400 or request a call-back via our contact us form and we will give you straight-forward advice and offer a free consultation.

There may not be a lot of funds available but this is further reason to seek proper advice. The guidance of an insolvency practitioner may prevent creditors taking legal action against you and you falling into further financial difficulty hence the costs of paying for professional advice are comparatively small.

Remember that we offer an initial consultation free of charge.

The answer is to give us a call on 0208 444 3400 or request a call back via our contact us form. That way we can make a quick assessment of your personal or company circumstances.

Otherwise our services section explains the different options that are available and the processes that you as a director, sole trader or individual will typically undergo. You will also find other relevant information in our resources section.

Since the implementation of the Insolvency Act 1986, anyone other than the Official Receiver who acts as liquidator, administrative receiver, administrator, supervisor or trustee must be a qualified insolvency practitioner.

Members’ Voluntary Liquidation: This happens when the company is solvent. The directors make a statutory declaration of solvency, and the shareholders then pass a resolution to put the company into liquidation. The liquidator pays the debts of the company in full, with interest, and then distributes the remaining assets to the shareholders.

Creditors’ Voluntary Liquidation: This happens when a company is insolvent. The members resolve to wind up the company, and the creditors then decide who the liquidator is. It is used where the company cannot pay its debts as they fall due, or where its liabilities exceed its assets.

Compulsory Liquidation : This is what happens when the court issues a ‘winding-up order’.