Frequently Asked Questions

We get asked a lot of questions from the easy "yes or no" to the unique and technical.

We've collected the most frequently asked questions we get & put the answers below to save you time.

If there's one you need to ask that isn't answered here - get in touch!

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FAQ

The final option would be to place the company into administration if there are sufficient grounds once the winding up order has been presented at court.

If the court agrees then an administration order would be made and the winding up petition dismissed. The company would still be closed and an insolvency practitioner would sell assets to pay off creditors but all legal action against the company would cease.

Once issued, a winding up petition can be withdrawn or set aside, but if you receive a statutory demand followed by a winding up petition then your first action should be to contact us so we can quickly get to work on your response.

 

  • Administrations are publicly advertised in the London Gazette so customers and creditors will know about it
  • Any secured lenders, such as banks, may be able to choose their own administrator to oversee affairs

Any negatives?

The negative considerations for the consumer IVA also apply as well as:

  • Your name will be included on the Insolvency Register
  • While some credit lines remain open, you won’t be able to use store or credit cards
  •  It’s likely you’ll need to open a new bank account that isn’t linked to your business
  • Does not apply to businesses in Scotland

Any negatives?

  • An IVA is a binding legal contract and there are consequences for breaking it
  • It will impact negatively on your credit rating - an IVA will stay on your credit file for six years from the beginning of the agreement
  • If you own your home you may have to remortgage to contribute towards debts when nearing the end of the IVA
  • Student loans, child maintenance, fines and other secured debts aren’t included in IVA debts - although they can be taken into account when establishing affordability
  • 75% of creditors have to approve an IVA - if they doubt you’d be able to afford the monthly repayments they may vote against it

After the Compulsory Liquidation process is completed then the business is dissolved and formally closed.

 

Directors aren’t held responsible for any unpaid company debts and are free to move onto their next venture unless they’ve been proven to have broken the law or given personal guarantees on the debt.

 

If any directors have been found guilty of wrongful trading or any voidable transactions then they may have to make a repayment from their personal funds to the company as settlement.

If you go down this route then the creditor may be happy to adjourn their action to allow this process to proceed. Among the advantages of a CVL here are that you have more control over the procedure — you can nominate your own liquidator and maintain a say in the direction of events.

Even before the Covid-19 pandemic we offered clients the chance to meet face-to-face or virtually through video conferencing or telephone.

 

If we need signatures on any documents then we can send them directly to you for verification and electronic signature to increase the speed of the process.

We are proud members of R3 - the trade association of business recovery professionals; the Turnaround Managers Association and the Insolvency Practitioners Association.

 

Our directors and managers also have years of business experience and knowledge both inside the insolvency industry and in several other sectors.

No.

We have worked with businesses across England, Wales, Scotland and Northern Ireland with knowledge and experience of the different rules and legislation that governs insolvency in the various countries.

There might be a thousand causes of an unpaid debt or broken promises that it would be paid and hasn’t been.

 

Ultimately - when a creditor or other party decides to issue a Winding-Up Petition, it’s their final way of saying “enough is enough.”

 

Sometimes this will be the latest stage of legal action - after they’ve already issued a Statutory Demand or obtained a court judgement. If that’s the case then these other measures will be judged as sufficient evidence by the court that the company can’t pay its debts and the Winding-Up Order will be granted.

 

In rare cases directors can apply to have their own company forcibly wound up if they have debts greater than £750 that cannot be repaid.

 

Shareholders must agree and the case must be made to a judge as to why the company has to be liquidated in this manner. If some shareholders dissent on this approach, directors may still proceed but they have to be in complete agreement.

 

Occasionally, a director that has fallen out with their colleagues may want to liquidate the company themselves but they will only be allowed to pursue a Winding-Up Petition if they are both a shareholder and a creditor.

The process has five steps — 80% of which can be completed in two weeks or under.

  1. You instruct us to help you place your company into liquidation. The first thing we need to do is carry out a full review of the company’s financial affairs.
  2. Independent third-party agents are instructed to value the company’s assets and goodwill which is then appropriately marketed for sale.
  3. A formal statement of affairs is prepared and a report to creditors that summarises the company’s financial situation and outlines the reasons why it’s being liquidated.
  4. A creditors meeting is arranged to formally place the company into liquidation where the report will be made available to them.
  5. The liquidator begins selling and realising the assets and making the correct distribution to creditors.

Initial consultations with our advisors are always free.

 

We can make them as convenient as possible in method or time and can discuss any issue your business faces and you need expert advice about.

 

The price of our services vary depending on the nature of the work but they are competitive and equal to the excellent and professional standards you would expect.

 

All of our services are transparent and set out in advance before engagement so there are no surprises or hidden charges. What we quote is what we pay.

Receiving a winding up petition isn’t terminal but you have to respond to it — even if you plan on closing your company, there are more efficient and beneficial ways for you than letting it fall into compulsory liquidation.

 

The most straightforward message of undoing a winding up petition is to either settle the original debt or come to a payment agreement with the creditor. If this is your preferred method then you need to act quickly before the petition is advertised.  If it is then even if you clear the debt, other creditors may take over the petition to ensure they are paid too.

 

If the debt can’t be paid then it’s best to consider the other options available:

  • Creditors’ Voluntary Liquidation (CVL)

 

If you go down this route then the creditor may be happy to adjourn their action to allow this process to proceed. Among the advantages of a CVL here are that you have more control over the procedure — you can nominate your own liquidator and maintain a say in the direction of events.

  • Company Voluntary Arrangement (CVA)

 

A CVA would allow the company to continue trading and repay creditors from profits over an extended period of time. CVAs usually provide creditors with a better return than a compulsory liquidation so they would be naturally more receptive to the idea of receiving more of their money.

  • Administration Order

 

The final option would be to place the company into administration if there are sufficient grounds once the winding up order has been presented at court.

 

If the court agrees then an administration order would be made and the winding up petition dismissed. The company would still be closed and an insolvency practitioner would sell assets to pay off creditors but all legal action against the company would cease.

 

Once issued, a winding up petition can be withdrawn or set aside, but if you receive a statutory demand followed by a winding up petition then your first action should be to contact us so we can quickly get to work on your response.

Any company looking to close down and go into liquidation doesn’t have to clear it’s debts straight away.

 

As long as they could reasonably be expected to pay them off within a 12 month period - either by selling off assets or making payments from reserves or current accounts - and still have assets remaining, then a Members’ Voluntary Liquidation would be the most appropriate method of closing.

 

There are several benefits to this approach but one of the most attractive is that any assets or cash that can be distributed back to members and shareholders would be taxed at 10% under Entrepreneurs’ Relief rather than the usual, higher rate.

 

Another comparative advantage of an MVL is the relative speed of the process.

 

If all shareholders are in agreement then it could be placed into liquidation within a working week. If there are no assets for the liquidator to place for sale and just cash to repay creditors and remit back to shareholders then the entire process can be completed and the company dissolved within a few weeks.

 

Obviously, the more work the liquidator has to do such as selling assets, sourcing and verifying creditor claims, the longer the process will take. We advise that while we’ll happily take care of these details for you, it’s quicker and more financially beneficial to deal with them before liquidation.

A CVL has several benefits for the directors of any insolvent company:

  • Director driven process — more control
  • All legal action against the company is stopped
  • Chance to regroup and start again as a new company
  • No chance of wrongful trading
  • Apart from any personal guarantees, all historic debt including to HMRC is written off
  • Outstanding finance agreements, lease agreements and employee contracts end
  • Employees guaranteed to receive pay from the Redundancy Payments Office
  • Company assets are available to purchase and use in a new company
  • A quick and efficient procedure — a Company Voluntary Arrangement can take at least five years if not longer.

What are the benefits?

All the benefits from a consumer IVA apply as well as:-

  • The business can keep trading and still use existing suppliers or lines of credit
  • You can keep any essential stock, machinery or tools required to run your business
  • Repayments can be structured to deal with seasonal or cash flow fluctuations
  • Business assets will be protected
  • Stops legal action against the company from creditors and HMRC
  • Directors remain in charge of the business allowing continuity
  • Allows for continuity of business

What are the benefits?

  • All creditor actions are suspended including debt interest and bailiff visits
  • Once agreed all parties are committed to and tied by the terms
  • IVA proposals are realistic as they are based on affordability rather than the overall amount owed
  • One clear monthly payment rather than several
  • You’ll often be able to retain your home and/or car - mortgage repayments are counted in outgoings when determining IVA repayments
  • When the IVA is completed any outstanding debt is written off for good

 

  • Best chance of a business retaining value and being a more attractive selling proposition
  • The directors can retain control of the company and use their ability to trade their way back to prosperity
  • Like any administration, the company is protected from legal action by creditors including HMRC

The company is closing because it cannot cover its liabilities. Along with this:

  • The liquidator is legally required to prepare a report on the conduct of former directors and officers of the company. Blame can be apportioned and any illegal behaviour uncovered will be reported
  • Creditors will receive less in return
  • The business has ultimately failed
  • If the company is unable to be saved as a going concern then the moratorium will end and the company would likely enter administration or liquidation
  • Creditors actions would be live again
  • Cannot be used to prepare for a pre-pack administration

What are the effects of a personal bankruptcy?

 

In the best case scenario for an individual, the bankruptcy will last a year until they are officially discharged.

 

This is not automatic and depends on them meeting their various obligations including cooperating fully with the Trustee, attending any meetings they’re required to and submitting all required documents and records.

 

Failure to cooperate with any requests from the Trustee could lead to the discharge being suspended until the bankrupt complies.

 

An undischarged bankrupt cannot act as a company director or obtain credit. Additionally depending on the circumstances that led to the bankruptcy, they could also be subject to a Bankruptcy Restriction Order (BRO) with further restrictions imposed for between 2 to 15 years for the worst offences.

 

There are also scenarios where the bankruptcy order could be annulled before discharge.

 

If the owed debts are paid off in full or if the debtor can prove that they were solvent and the order should not have been made.

 

If creditors approve an IVA then this would also see an annulment as it would provide a better return for them than bankruptcy.

A Statutory Demand is only one of the stages in the compulsory insolvency process:-

 

  • Statutory Demand - If a creditor is owed £750 or more they can issue one
  • Winding Up Petition - If the demand is ignored or can’t be settled or set aside then a Winding-Up Petition can be served on the company
  • Official Court Hearing - A judge will look at the evidence and hear arguments to decide if the Winding-Up Order is granted
  • Official Receiver - Now the company is formally in Compulsory Liquidation, an official receiver is appointed as the liquidator of the company. They’ve got up to 12 weeks to decide if they wish to call a meeting of the company’s creditors
  • Liquidator appointed - The liquidator will administer their formal duties including notifying Companies House, place an announcement in the London Gazette and contacting creditors
  • Finalisation - once the Liquidator has raised funds through selling the company’s assets - they will distribute them to creditors and issue a Final Progress Report to Creditors setting out the situation and obtaining a release from office

 

Once the Compulsory Liquidation process begins then creditors cannot bring any further legal action against the business.

There are four main steps to complete a successful solvent liquidation:

 

  • Formally instruct us to help you - we begin with a review of the company’s finances.
  • This forms the majority of a statement we prepare on the company’s assets and liabilities. All directors sign this as a Declaration of Solvency.
  • A liquidator is appointed and begins the process of selling and realising the company’s remaining assets.
  • Once all creditors and costs have been repaid in full, they distribute any surplus money among shareholders.

 

Benefits

  • Straightforward and inexpensive compared to other liquidation processes
  • Any surplus assets can be either bought back or transferred to shareholders
  • Entrepreneurs Relief can bring significant savings
  • Creditors receive their money in full
  • The liquidator doesn’t have to prepare a report on the conduct of directors

 

Any Negatives?

  • More expensive than Dissolution
  • The company has to be solvent. If it later materialises that the company is unable to settle all its debts then the directors have committed an offence

Another form of Solvent Liquidation is Dissolution or Striking Off. Companies can only complete this under a certain set of circumstances.

The business must have ceased all activity including trading for a total of three consecutive months and no longer hold any assets.

It should also have cleared all of its debt. A director looking to dissolve their business with some debt outstanding could find themselves being held personally liable for it and subject to potentially considerable costs if the company has to be resurrected to pay them off.

Dissolution itself is a relatively simple, inexpensive and straightforward matter as it entails completing some correspondence at Companies House.

The process takes approx. three months but includes a statutory two months notice period given at Companies House.

Benefits

  • No creditors meetings, directors reports compiled or additional bureaucracy
  • All creditors are paid their money in full
  • Remaining assets can be transferred directly to directors or shareholders

 

Negatives

  • Any existing contracts or finance agreements remain in place
  • Various stakeholders can apply to resurrect the company if correct procedure isn’t followed; the company has been active and trading in the three months prior to dissolution and if any directors have committed fraud
  • Directors could be held personally liable for any of the company’s outstanding debts or liabilities

The timeline for a winding up petition being issued goes like this:-

  • Statutory demand issued — this gives the company 21 days from receipt to either settle the outstanding debt, make alternative payment arrangements or look to have the demand set aside.
  • Winding up petition presented — this can also be advertised in the London Gazette so public word will be out. Worse, this could lead to the company bank account being frozen and being unable to trade.
  • Court hearing date set at least seven days later to decide if the company will be placed into compulsory liquidation.
  • The judge will listen to the reasons for the petition and if convinced, will order the business to be placed into compulsory liquidation.
  • As well as the company being closed down, the official receiver will launch an investigation into the conduct of directors prior to the liquidation — with potential consequences including being banned from being a director for years and being made personally liable for the business’s debts

There are several reasons why you might consider entering into an IVA.

  • You might have received a statutory demand or been threatened with bankruptcy by a creditor
  • You’ve received a large tax penalty from HMRC or are unable to settle any other official tax debt
  • If you work in an occupation such as accountancy or as a solicitor where bankruptcy would bar you from the profession, an IVA would allow you to continue working
  • You might already be managing multiple repayment plans with additional interest mounting up - an IVA allows you to combine all debts into one manageable payment plan with interest being frozen
  • You might already be in a debt management plan and an IVA would bring closure and finalty to dealing with creditors
  • If you are already bankrupt and undischarged, an IVA can be a way of annulling your bankruptcy

So how does an IVA work?

The first thing you need to do to formally set up an IVA is to engage an insolvency practitioner like ourselves.

Any IVA has to be agreed with creditors and managed by a professional insolvency practitioner. All our fees are open, clear, transparent and agreed in advance so there are no surprises later.

We’ll have a meeting and the first thing we’ll look at is if an IVA is the most appropriate way forward for you. There might be other options that would serve you and your creditors better.

If you decide this is the right option then we’ll prepare your IVA proposal for you.

We collect various documents to create it including a full list of creditors, the details and amounts of debt owed and their contact details. We’ll also need proof of your monthly income and expenditures as well as details of other assets like your home situation, car and any other facts that have a bearing on your overall financial situation.

Next we prepare for your IVA presentation and creditor vote.

We send copies of your IVA proposal to your creditors in advance as we need to secure a 75% majority vote in favour for it to pass and become binding.

 

A virtual meeting is held to determine the outcome with creditors voting postally or electronically.

 

If the IVA passes then the proposal becomes a legally binding contract and your monthly repayments begin. We’ll review your financial situation annually as the supervisor of the IVA and if your circumstances change - for better or worse - we can look at renegotiating your proposal to better reflect the reality of your situation. This could also include allowing for any equity growth if you are a homeowner.

 

Once the IVA is completed, any remaining debt classed as unaffordable in the initial proposal is written off.

Why choose Robson Scott Associates?

 

We’ve been operating successfully for over 15 years and in that time have become one of the most respected corporate insolvency practices in the UK.

 

Our modern and intuitive work processes are combined with our years of knowledge and experience. Our one-to-one personal client services allow us to offer efficient and effective advice that is both commercial strong and technically correct.

A CVA would allow the company to continue trading and repay creditors from profits over an extended period of time. CVAs usually provide creditors with a better return than a compulsory liquidation so they would be naturally more receptive to the idea of receiving more of their money.

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