Advice for directors of companies in financial difficulty, for creditors owed money by an insolvent business, and on statutory demands and petitions.
We advise directors of companies under financial pressure, creditors owed money by businesses that may not survive, and individuals facing bankruptcy. Once a company is insolvent or close to insolvency, the decisions its directors take can lead to personal liability, so we advise directors on what to do and how to record it. For creditors, we advise on statutory demands, winding-up and bankruptcy petitions, personal guarantees, and claims in an administration or liquidation.
When a company is insolvent or close to insolvency, or an insolvent liquidation or administration is probable, its directors must take the interests of creditors into account when making decisions. A director who continues trading after they knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation or administration, and who did not take every step to minimise the loss to creditors, can be ordered to contribute to the company's assets. Payments that prefer one creditor over the others and sales of assets for less than their value can also be reversed. We advise directors on board meetings and minutes, cash-flow forecasts, dealing with creditors, and when to consult a licensed insolvency practitioner.
A company in difficulty may have more options than liquidation. Depending on its position, these include an informal arrangement with creditors, a company voluntary arrangement, administration, a moratorium that protects the company from creditor action while a rescue is pursued, a restructuring plan, or a creditors' voluntary liquidation. We advise the directors and shareholders on their own position and on the legal documents, alongside the insolvency practitioner advising the company.
For creditors, we advise on the options for recovering payment. A statutory demand can put pressure on a company or an individual who does not dispute the debt. If a customer has already entered administration or liquidation, we advise on submitting a claim, on retention of title to goods you supplied, and on whether a director or guarantor can be pursued. We also act for insolvency practitioners who need a solicitor for recoveries or for challenges to transactions made before an insolvency.
If you are a director, bring the latest management accounts, a list of creditors and the amounts owed, details of any personal guarantees, and any board minutes. If you are a creditor, bring the contract or terms, the invoices and statements, and the correspondence about payment. We confirm the scope of the work and its cost in writing before we start, and where time is short we agree the urgent first steps with you straight away.
The work we do most often in this area. If your matter is not listed, ask us.
Advice for directors of a company that is insolvent or close to it on their duties to creditors, the risk of personal liability for wrongful trading, preferences and transactions at an undervalue, and how to record the board's decisions and the reasons for them.
Advice when a lender, landlord or supplier demands payment under a personal guarantee after a company has failed: whether the guarantee is enforceable, what it covers and how to negotiate a settlement. We also act for creditors enforcing a guarantee.
Serving statutory demands, presenting winding-up and bankruptcy petitions, and acting for companies and individuals who have received a demand or a petition, whether the debt is disputed or a payment arrangement is needed quickly.
Submitting claims to administrators and liquidators, recovering goods under retention of title clauses, voting on proposals such as a company voluntary arrangement, and challenging an office-holder's decision where there are grounds to do so.
Legal advice for the directors and shareholders of a company considering a company voluntary arrangement, administration, a moratorium or a restructuring plan, working with the insolvency practitioner on the proposals and the documents.
Advice for individuals facing a statutory demand, a bankruptcy petition or an individual voluntary arrangement, including the effect on a home, a business and personal guarantees, and advice for creditors dealing with an individual who cannot pay.
We tell you early whether there is a problem to deal with and what your realistic options are, with the likely cost of each.
An experienced solicitor does the work on your matter and stays your point of contact until it is finished.
We keep the matter moving and update you at each stage: what has happened, what happens next and when.
Take advice before you decide which creditors to pay or whether to continue trading. Hold regular board meetings, minute the decisions and the reasons for them, and keep cash-flow forecasts up to date. Do not repay loans from directors or connected people ahead of other creditors, and do not sell assets for less than their value. Once there is no reasonable prospect of avoiding insolvent liquidation or administration, directors should take every step to minimise the potential loss to creditors, and a licensed insolvency practitioner should be consulted.
Wrongful trading is where a director of a company that goes into insolvent liquidation or administration knew, or ought to have concluded, at some earlier point that there was no reasonable prospect of avoiding that outcome, and did not then take every step to minimise the potential loss to creditors. The court can order the director to contribute to the company's assets. It judges the director against a reasonably diligent person with the knowledge, skill and experience expected of someone in that role, and the director's own if greater, so a written record of the advice taken and the decisions made is important.
Usually not, because a limited company is responsible for its own debts. The main exceptions are debts you have personally guaranteed, and claims brought by a liquidator or administrator, for example for wrongful trading, for misfeasance, or to repay money you received ahead of other creditors. A director whose conduct makes them unfit to be concerned in the management of a company can also be disqualified for up to 15 years. We look at your own exposure and what can be done to reduce it.
A statutory demand is a formal written demand for payment of a debt. If a company does not pay a debt of more than £750 within three weeks of the demand being served, the creditor can petition the court to wind the company up. For an individual, the debt must be at least £5,000 before a bankruptcy petition can be presented. An individual can apply to the court to set the demand aside, for example where the debt is disputed on substantial grounds, usually within 18 days. A company cannot challenge the demand itself, but it can apply to the court to stop a winding-up petition.
Submit a claim, called a proof of debt, to the administrator or liquidator, and check whether you have rights that improve your position. If your terms include a valid retention of title clause, you may be able to recover goods you supplied that have not been paid for and can still be identified. Check whether anyone personally guaranteed the debt and whether you have credit insurance. In a liquidation, unsecured creditors are paid after the costs of the liquidation, preferential creditors such as employees owed wages, and lenders holding security, so they may receive only part of what they are owed.
Depending on the company's position, a company voluntary arrangement allows it to agree a repayment plan with its creditors while it continues to trade; administration protects the company from creditor action while an administrator tries to rescue the business or achieve a better result for creditors; a moratorium gives the company a period of protection from creditors while the directors pursue a rescue; and a restructuring plan can bind creditors to a compromise approved by the court. Each depends on the business being viable and having funding, so they are worth considering before creditors begin enforcement action.
Before any work starts, we write to you setting out what we will do, what is not included and what it will cost, as a fixed fee or an estimate. If the work changes, we agree any change in cost with you in writing first.
One of our solicitors, Robert Festenstein or Alon, handles your matter and is your contact throughout. The letter confirming your instructions names the solicitor responsible.
Send us a short summary using the enquiry form, with the names of the other people or businesses involved and any deadline. We check for conflicts of interest and then arrange a call with one of our solicitors.
Tell us what has happened and we'll arrange a call with one of our solicitors.