No matter how well you run your business, there’s always a chance of something going wrong. It’s often something completely beyond your control: a cashflow problem, an unpaid invoice, a contract that’s fallen through. Individuals are just as vulnerable: sickness, redundancy or plain bad luck can suddenly make your life very difficult.
You can’t take back what’s happened, but you can choose what you do next, and there may be more options than you think.
Bishop Fleming is one of the top 20 business recovery and insolvency firms in the UK. We’re highly qualified and experienced, and we can provide the guidance and support that you’ll need to make your way through the maze of insolvency.
Our team covers the whole west of England, with offices in Bath, Bristol, Exeter, Plymouth, Torquay, Truro and Worcester.
The quicker you act, the more chance you’ve got of being able to save your business or personal affairs. We’re happy to meet you for a free, no obligation discussion to see how we can help you do that.
Here's how we can help you or your business:
What is bankruptcy?
If you can’t pay your debts as and when they fall due, or if what you owe exceeds the value of your assets, then you’re insolvent. Bankruptcy is a formal court procedure, which you can start yourself. If one of your creditors is owed at least £5000, they can start it instead.
In a bankruptcy, your assets will be sold to pay off your creditors – this will usually exclude your personal belongings, the contents of your home and the tools of your trade; but if these have a high value, they may go too.
Other than the obvious loss of property, bankruptcy can carry some heavy consequences, including a damaged credit rating and frozen or closed bank accounts. You also won’t be able to act as a company director.
With this in mind, bankruptcy should probably be your last resort. You might be able to take another route, like an IVA, under which you may be able to stay in your house, continue to trade your business or remain as a company director.
If you can’t pay your debts or if what you owe exceeds the value of your assets, then you’re insolvent.
Historically, the only way out would have been bankruptcy, but an Individual Voluntary Arrangement or IVA is an increasingly popular alternative. An IVA is a formal but usually flexible financial arrangement dealing with all of your debts.
It is set up via an Insolvency Practitioner, the precise terms of which requires approval by your creditors. We have assisted with hundreds of IVA’s successfully enabling individuals to variously continue in trade, retain home ownership and act as Company Directors.
What else can I do if I’m insolvent?
It might be the case that neither a bankruptcy or an IVA works for you. There are some other options for you to consider. These include:
Bishop Fleming Business Recovery and Insolvency doesn’t deal directly with all of these procedures, but if we think they’re the right direction for you to take, we can put you in touch with one of our partner organisations, who’ll take you the rest of the way.
If a company is in financial difficulty then Administration may be the route to save all or part of the trading entity.
Whilst Administration can be instigated by Directors and Shareholders it is often at the request of a debenture holder, usually a bank. This is an involved process that requires good communication between interested parties. That is a skill we can provide.
Primarily, we’ll see if the business can be turned around with some restructuring. If that’s not an option, we’ll try to sell the business as a whole and keep it running with new owners.
If we can’t achieve either of these aims, then we’ll sell the business assets and distribute the proceeds in accordance with Insolvency legislation.
There are three types of liquidation, all of which involve “winding up the company”. Compulsory liquidations and creditors voluntary liquidations are for insolvent companies, and members’ voluntary liquidation for solvent companies.
In this procedure the liquidation decision is made by the Court following a petition presented by either the directors/shareholders or creditors owed £750 or more. There is no turning back, all the company’s assets have to be realised to make a distribution to creditors providing all the liquidation costs have been met.
The case would be handled initially by the Official Receiver’s Office and in appropriate circumstances can be handed on to an independent Insolvency Practitioner, such as Bishop Fleming offers.
This Court route can be avoided by instigating a Creditors Voluntary Liquidation (see next tab) but not if you leave it too late!
If a creditor is threatening liquidation talk to us now.
Creditors Voluntary Arrangement
Voluntary liquidation is started by the Directors of an insolvent company in co-operation with the Shareholders. An independent Insolvency Practitioner is appointed to wind up the affairs of the company, realising all assets with the intention of providing some recovery to the creditors.
The creditors have a right to control who is appointed liquidator.
We have vast experience in this area including the ability to consider all options with the company officers before resorting to this terminal procedure.
Members Voluntary Arrangement
If you want to close a company or LLP partnership that’s still solvent, perhaps because you’re retiring or want to release company’s property, we can help with a Members’ Voluntary Liquidation (MVL). Bishop Fleming can arrange for shareholders to extract value in a tax-efficient manner, meaning you get the most out of your business.
Businesses as well as individuals can benefit from voluntary arrangements. These are a protected agreement with your creditors set up by an Insolvency Practitioner like Bishop Fleming.
Voluntary Arrangements can be proposed by Companies, LLP’s and Partnerships. It is a formal but usually flexible financial arrangement dealing with all of the company debts, which can last up to five years. It is set up via an Insolvency Practitioner, the precise terms of which requires approval by your creditors. In our experience the bank is likely to play a crucial role if an Arrangement is to be approved. Come and talk to us.
Company Voluntary Arrangements
A CVA route has been successfully used by companies and LLPs to trade through a financial crisis by paying off in part or in full old debt, without facing the terminal route of liquidation. Where a company can show that it has the leadership and a realistic financial plan that can offer to creditors significant recovery of a potential bad debt then we are able to support a CVA proposal and work with your creditors.
The advantage of this for you and your business is your creditors are just as bound as you are, so for the duration of the CVA, your business is protected; your creditors can’t back out of the arrangement or demand different terms once it’s been agreed.
A CVA is, in effect, a business tunnel – your business will be set on one path for a while, but will hopefully emerge from the other end healthy and able to continue trading as you were.
Partnership Voluntary Arrangement
A PVA is very similar to a CVA route (see previous tab) but applies to a formal (non LLP) partnership situation. It is a rarely used route but come and talk to us.
It may be that a voluntary arrangement isn’t the right way to go for your business, or that you or one of your creditors have already taken you too far down another path. Even if this is the case, there’s plenty that Bishop Fleming can do to help.
There are various signs that your customer might be starting to suffer financial pressure.
The obvious one is that they are slower to pay than normal, but they might start paying lump sums, instead of specific invoices, or start making more frequent, smaller orders. If they stop ordering altogether, it may well be that they have used up their credit with you, and are now running up credit with another supplier.
The loss of a customer will mean more than just a bad debt. If they are a significant customer, you have the problem of replacing those lost sales. There might be an adverse effect on your own margins and profits and you might need to reshape your own business to compensate. Speaking to your customer early enough might mean the difference between that customer’s survival and its failure; between keeping those sales and losing them.
Whatever the symptoms, if they are struggling to pay you, or suffering from cashflow difficulties, you need to be alert to the signs, your options and how we can help.
How you can help your customer
All too often we see businesses trying to help (e.g. by extending more credit or longer payment terms) without their customer getting to grips with the underlying problems. The first step is good, effective credit control which is alert to the early signs of financial stress and can warn you in time to do something.
What you need to look out for
You should make sure that your retention of title clauses are effective and can be relied upon. Visit your customer and have a look round, if you can. See how busy they are. See if your stock is on site. If they have got your stock they cannot sell, but which you can sell to other customers, take it back, issue a credit note and supply stock that they can sell, preferably on a pro-forma basis.
What can I do now?
If you think you have exhausted all normal credit control procedures, you have stopped supplying your customer and your debt is not being repaid, what are your options?
Essentially, you have no choice but to commence legal action. If the debt is due and payable, you can either seek a County Court Judgement (if the debt is disputed or as the first step before instructing a Bailiff to recover goods) or issue a petition for a compulsory liquidation of the company (a winding-up petition). If you are owed money by a company, there is no need to issue a Statutory Demand for payment; if you are owed money by an individual, you need to go through the process of issuing a Statutory Demand or a letter before action before proceeding to a CCJ or to a bankruptcy petition.
Petitions for winding-up or bankruptcy are not particularly cheap. To wind-up a company your debt must be at least £750, and the Court fees are (currently) £1,630. The Court does not like petitions being used as crude form of credit control; you need genuinely to have reached the end of the road in other collection methods. The minimum debt for a personal bankruptcy is £5,000. Petitions are not straightforward to prepare or serve.
The Official Receiver
In either a compulsory liquidation or a bankruptcy, the Official Receiver (“OR”) is initially appointed, although if you are the petitioning creditor you can usually get your own choice of Insolvency Practitioner to be appointed in place of the OR. The process takes time, and during this time there is a risk that assets will be dissipated and the prospect of any repayment of your debt will be reduced.
Is a petition right for your business?
Incurring the cost of a petition is often not that attractive: you remain an unsecured creditor, and whilst your petition costs rank ahead of almost all other costs in the liquidation, there is no guarantee you will even get that money back.
You might prefer to see if you can get your customer to agree to talk to us. We can (at the very least) then advise you if it is worth taking any further action. Perhaps your customer will accept that his business is insolvent and will take steps himself to commence a liquidation or administration. These are appointments we can take so, whilst we have to act in the interests of creditors as a whole and cannot be partisan in favouring you ahead of other creditors, you will at least know that your customer is taking proper advice and the prospects of a recovery of some of your debt are being maximised.
If you think that you need to start to take recovery action against one of your customers, come and talk to us first.
I have discovered that my customer has received a winding-up petition. What should I do next?
A Winding Up Petition is the most serious form of action a creditor can take against a company, and will result in the company entering compulsory liquidation on the basis that it is unable to meet its liabilities as and when they fall due, unless the Petition is successfully contested or otherwise dealt with prior to the making of the Order.
The process involves the appointment of a Liquidator who has considerable powers to investigate the company’s affairs and the reasons for its failure, and realise the company’s assets for the benefit of creditors. Initially, the Official Receiver is tasked with overseeing the liquidation, but if circumstances permit an independent third party Liquidator is then appointed, generally by the Secretary of State or, less frequently, by the company’s creditors.
The loss of a customer will not only result in bad debt; if they are a significant customer you have the problem of replacing those lost sales. There might also be an adverse effect on your margins and profits and you might need to reshape your own business as a result.
Taking control of a liquidation
Compulsory liquidation is generally considered the last resort because all other options have already been exhausted, so once the Order is granted the compulsory liquidation process is established and matters are, in the main, taken out of your hands.
However, it is important to remember that you can proactively take control of the situation and participate in the process by providing important information to the Liquidator, and helping to influence decisions that are made in a way that maximises your prospects of recovery. As a creditor, you are also entitled to make representations to the Official Receiver if you wish for a particular Liquidator to be appointed.
How we can help
On many occasions insolvency proceedings are initiated and enforced without the debtor being proactive about their predicament, and before they have taken insolvency advice. That is not something you can enforce as the third party creditor, but what we can do on your behalf is approach your customer to establish if alternative options, such as a Company Voluntary Arrangement, are viable which may then give rise to a better recovery to creditors and the possibility of ongoing trade.
There is a very narrow window of opportunity between the advertising of the petition and the making of the Order and therefore the sooner you contact us the better are the prospects of a successful outcome.
Call us as soon as you can
Once you have discovered that your customer has received a Winding Up Petition or has otherwise entered compulsory liquidation, contact a member of our team who will be able to assist by:
I have received a notice of decision procedure letter in relation to a proposed liquidation. What do I need to do?
In our experience this is the most commonly asked question by creditors. While it is true that you cannot prevent your customer from entering liquidation, critically it is not too late to take control of the situation.
As the creditor, you are entitled to requisition a meeting of creditors provided the appropriate threshold is met and then vote on the appointment of an Insolvency Practitioner, and this is where we can help. Attendance at the creditors’ meeting provides you with a crucial opportunity to provide information and influence decisions in a way that maximizes your recovery prospects.
Once you receive notification of your customer’s pending liquidation, all you need to do is simply notify our team and we can assist by:
Where debts are concerned, speed is the essence and the sooner you contact us the better are the prospects of a successful outcome.
What can I do to protect or realise my loan?
A secured lender will rank ahead of an unsecured lender if there are eventually funds available to be paid to creditors. Secured lenders also have a wider choice of options for the enforcement of action than unsecured lenders.
Secured lenders will generally fall into two main types: those with a Fixed Charge over a specific asset or class of assets (e.g. a lease creditor who has funded the purchase of a piece of plant) or a Fixed and floating charge creditor such a a Bank with a debenture. The main differences for the Company is that a fixed charge asset cannot be sold without the permission of the creditor, whereas floating charge assets (such as stock or book debts) can be sold / realised without reference, but on an insolvency event the lenders rights crystallise over those floating charge assets and they become fixed charges. Land and buildings will usually be secured by a Fixed Charge such as a Mortgage, and there may well be a Fixed and Floating Debenture as well.
What steps can I take?
Make sure you have a full set of the correct loan documents, that your copies are signed (and witnessed if a Deed);
Review those documents to see what your rights are.
A Fixed Charge will normally restrict rights to the repossession of the asset itself, and that asset will be identified in the loan documents. Confirm with the borrower that your assets are still on site and are clearly identifiable;
A Fixed and Floating Charge lender will usually be able to place a company into Administration and to choose the Administrator who takes the appointment.
In addition a lender with a property mortgage will usually be able to appoint a LPA Receiver over a property, who is allowed to collect rent and to sell the property on behalf of the lender. LPA Receivers have limited rights compared to an insolvency Administrator or Liquidator.
Seek a meeting with your customer, ask to management accounts and cashflow statements, to look for accuracy, consistency and credibility in their preparation;
Seek advice as to how you can enforce your rights, if you have to
Your enhanced rights over unsecured creditors mean that not only do you stand a better chance of a recovery in an insolvency, you are also better placed to get early warning of financial stress and to influence the company directors to take advice. Signs to look for will include late payments, requests for additional finance under existing loans, requests for redemption values, and contact from other lenders seeking details of your security over assets.
If your customer agrees, we can review their management accounts to see if they show signs of stress or insolvency, and if agreed, we can advise them on their insolvency options and possible restructuring routes that might be open to them. If your customer refuses to engage with you, or to take the steps you think they need to, your only option is to exercise your rights granted in your loan documents.
As always, the sooner you act, the better are the prospects of a successful outcome.
The average litigation case for a small or medium sized business is around 18 months, so it’s not uncommon for bills to spiral to the level of the damages that you’re claiming. Even if you can find a lawyer to act for you on a ‘no win no fee’ basis, you’ll still have to pay up front for disbursements such as court fees. And, of course, you could be liable for all or some of the defendant’s costs as well as your own if you lose the case.
It’s hardly surprising, then, that many businesses decide against pursuing a claim and reluctantly write-off what they are owed. That’s why Escalate was created, a smarter way to resolve commercial disputes that prioritises your cash flow by focussing on a quick settlement, removing upfront costs and minimising risk.