What an insolvency practitioner can do for you
Insolvency practitioners are qualified professionals who can assist with putting in place procedures for struggling companies and individuals.
How does insolvency work?
If a company is considering a Company Voluntary Arrangement - that is, an agreement between the company and creditors of how a debt is to be repaid - then an insolvency practitioner will be involved on both sides.
- Initially, the directors of the company will make a written proposal to creditors, identifying an insolvency practitioner who must look at the proposals and report to a court as to whether or not the proposals are viable
- If the proposal is viable, then the insolvency practitioner will usually call a meeting of creditors and members in which creditors will vote on the proposals. A majority of more than 75% will mean that the proposal has been approved and all unsecured creditors will be bound by it
There are a number of other ways a struggling company can be saved. Administration is one way to attempt to avoid liquidation.
Administration is available for insolvent companies and allows for a company to continue trading as a business, which will either end with the recovery of the business or liquidation. Insolvency lawyers should always be consulted if this is an option being considered.
What do insolvency practitioners do?
Insolvency practitioners are involved in most aspects of struggling companies, either:
- Assisting with the winding up of the company
- Attempting to save the company using one of the rescue mechanisms available
Insolvency practitioners are often responsible for making proposals and implementing them.
They also have an important role to play in bankruptcy. An individual could avoid bankruptcy by entering into an Individual Voluntary Arrangement (IVA) with creditors.
This type of agreement allows the bankrupt and creditors to agree terms of paying back the money owed. This type of arrangement benefits the creditor, as they are able to recoup some, if not all of their money.
The scheme benefits the debtor, as they avoid being declared bankrupt and are likely to have reasonable terms agreed to pay back the money owed. Insolvency lawyers can give advice on such agreements.
Businesses can use an insolvency practitioner in different ways depending on the extent of their financial difficulty. An insolvency practitioner may be able to help a business solve their financial problems if they are approached early enough. Early legal advice can prevent irreversible effects on your business.
For more general advice on the differences between insolvency and bankruptcy, see our information page on insolvency law
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