Despite high levels of business failure, particularly among new companies, most entrepreneurs do not dwell on the idea that their venture may not succeed.
However, if your business does start to struggle financially, you need to know where to turn for trustworthy debt advice.
Getting expert guidance at the right time will help you understand your options, protect you as a director and lead to a better outcome for your business.
That’s why, when your livelihood is at stake, you should contact a licensed insolvency practitioner, writes Jon Munnery, a company insolvency specialist at UK Liquidators.
What is a licensed insolvency practitioner?
A licensed insolvency practitioner is a qualified professional who is legally authorised to help individuals and businesses address and manage debt issues and insolvency situations.
A business becomes insolvent when it cannot pay its debts when they are due, or the value of its debts exceeds its assets. When you reach that point, it triggers certain legal obligations.
Licensed insolvency practitioners can help you understand what those obligations are, how to navigate them and the solutions available.
Those solutions include:
- Informal debt restructuring and repayment arrangements
- Formal insolvency procedures such as Company Voluntary Arrangements and Administration
- Liquidation as a last resort
Why must insolvency practitioners be licensed?
Insolvency practitioners in the UK must be licensed to implement and administer formal insolvency procedures, such as liquidation and formal debt arrangements.
Under the provisions of the Insolvency Act 1986, licensed insolvency practitioners are:
- Qualified, experienced and have passed the necessary exams
- Required to follow strict professional and ethical standards
- Regulated and supervised by a recognised professional body - that includes the Insolvency Practitioners Association (IPA), the Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants in Scotland (ICAS)
- Monitored for compliance, professional standards and ethical conduct, and can lose their license if they act improperly
Other individuals can provide business debt advice.
They may call themselves ‘insolvency advisors’ or ‘debt relief companies’.
However, only licensed insolvency practitioners are permitted to act in formal insolvency procedures and take legal control of a company or an individual’s affairs.
The risks of unqualified advice
If you seek business debt advice from someone other than a licensed insolvency practitioner, their credentials, experience and qualifications can vary, and they are not subject to the same level of regulation. In some cases, these advisers act as intermediaries, charging an upfront fee before referring you to a licensed insolvency practitioner.
These are some of the dangers of unqualified insolvency advice.
Unnecessary costs
Most licensed insolvency practitioners do not charge a fee for initial advice, while some unlicensed advisers may. They may also recommend strategies that seem appealing, but are not practical or suitable in your specific circumstances. And they cannot implement formal insolvency procedures, which significantly limits the options available.
Legal and financial penalties
Licensed insolvency practitioners understand the complex laws that govern insolvency and can guide you through them while protecting you and your creditors’ positions. Unqualified advisors often lack this knowledge, which could lead to a breach of insolvency laws. The result can be financial penalties, personal liability for business debts and even disqualification from acting as a company director.
An adverse impact on credit and future opportunities
Failing to deal with debt issues promptly or in a legally appropriate way can have a long-term and unnecessary impact on your company’s credit rating. That can make it more difficult to borrow money affordably in the future.
The conduct of company directors is also closely scrutinised during insolvency, which can lead to restrictions on acting as a director and bans from managing a company in the future.
Emotional and mental stress
If your company is struggling financially, a stressful time can be made worse by unqualified advice. You need reassurance, clarity and a structured plan, not the unexpected legal challenges, mounting debts or confrontations with creditors that can result from poor advice.
It’s not the time to cut corners
If your company is struggling financially, you’ll naturally want to pursue low-cost options, and making a call to a business debt charity is a good place to start.
However, when it comes to professional insolvency advice and procedures, only a licensed insolvency practitioner will do.
Speak to the Right Expert, At the Right Time
Myerson works closely with a trusted network of licensed insolvency practitioners, ensuring our clients receive regulated, expert advice when it matters most.
If your business is experiencing financial difficulty, our Insolvency Lawyers can help you understand your legal position as a director and, where appropriate, introduce you to a suitably qualified insolvency practitioner to guide you through your options.
0161 941 4000
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Guest Author
Jonathan Munnery
Company Insolvency Specialist
Jonathan Munnery is an experienced Insolvency and Restructuring expert, advising company directors at all stages of financial distress.
A Member of the Insolvency Practitioners Association (MIPA) and the Association of Business Recovery Professionals (MABRP), Jonathan has spent many years working in insolvency, supporting directors both as they approach insolvency and where an insolvent position has already arisen.
UK Liquidators