An insolvency practitioner is a person that’s licensed to take action regarding the financial affairs of an insolvent business. If your company (or partnership, or even you as an individual) become insolvent, an insolvency practitioner (or ‘IP’) can assist in sorting out its finances.

In the UK, insolvency practitioners need to be licensed in order to practice. They also must have passed the Joint Insolvency Examinations (JIEB), possess sufficient insolvency experience and belong to one of the UK’s recognised professional accounting/insolvency bodies.

Is your company experiencing financial problems? By law, you need to stop trading if and when your business becomes insolvent. Contacting an insolvency practitioner as soon as you become aware of your company’s insolvency can increase the possibility of a full financial recovery.

How can an insolvency practitioner help your business?

An insolvency practitioner can help your business in several ways. The main goal of most IPs is to rescue a distressed, insolvent business, either by entering into an agreement with creditors to gradually pay back some or all debts, by selling assets, or by entering into administration.

In some cases, it’s not possible to rescue a business. If your business has major financial issues that make recovery impossible, an insolvency practitioner works to maximise creditors interests, typically by entering the business into liquidation to convert its assets into cash.

When your business works with an insolvency practitioner, there are several outcomes. Some of the most common outcomes are listed below:

• The insolvency practitioner may propose a Company Voluntary Arrangement. This is an agreement with your company’s creditors that allows your business to pay off some or all of its debts via a monthly installment for a period of time, allowing it to avoid liquidation.

• The insolvency practitioner may enter your company into administration. Administration is a process that involves the insolvency practitioner taking control of your company’s financial affairs, with the goal of satisfying creditors and returning to financial stability.

• The insolvency practitioner may use emergency financing, either in the form of a loan or a cash flow solution such as invoice factoring, to improve cash flow and create liquidity, allowing your business to pay its creditors.

• The insolvency practitioner may recommend pre-pack administration. This is a process that lets your company preserve certain assets through a pre-packaged sale, creating continuity and raising funds to pay creditors.

• If your business can’t realistically become solvent again, the insolvency practitioner may opt to enter your company into voluntary administration — a process that involves the closure of the company and the sale of its assets to raise cash and pay creditors.

Insolvency practitioners also complete other tasks on behalf of your business, such as trying to collect debts due to your company that could improve its liquidity, allow it to pay its creditors and end creditor-initiated legal pressure.

Does your business need an insolvency practitioner?

If your business is insolvent, or could soon become insolvent, you should contact an insolvency practitioner right away. The sooner you speak to an insolvency practitioner, the greater the chance that they can help your business solve its financial problems and recover.

If you don’t take action upon learning that your company is insolvent, you could be prosecuted for violating the Insolvency Act 1986. Ignoring your director’s duties is a type of wrongful trading that can result in fines, restrictions on operating a business and other penalties.

Are you concerned about your company’s finances? If your business meets one or several of the criteria listed below, you should strongly consider contacting an insolvency practitioner as soon as possible:

• Your company has poor cash flow that makes it very difficult for it to pay its creditors on time, or even after receiving a demand letter. As a result of this poor cash you, you often pay creditors behind schedule.

• Your company can’t afford to pay its creditors at all. If your company is completely out of cash and has no forms of cash flow (either cash from sales or credit), there’s a very high risk that it’s insolvent.

• Your company has more debt than the value of its assets. This is a form of insolvency known as “balance sheet insolvency” that is a serious issue for your business. If your company is balance sheet insolvent, you need to take immediate action.

• Your company is severely over leveraged, with significant amounts of debt that pose a risk to its financial solvency. Companies with lots of debt, relative to cash flow, are at a very high risk of becoming insolvent is cash flow decreases.

Do any of the above descriptions sound like your company? Even if only one of the items listed above applies to your company, it’s important to take immediate action. Our insolvency experts can help you implement new solutions to avoid facing the risk of your company being liquidated due to legal action from its creditors.

Get confidential advice from our expert insolvency practitioners

Are you concerned about your company’s finances? If you’re worried that your company could become or already is insolvent, you need to speak to an insolvency practitioner to learn which options are available.

Our experienced insolvency practitioners have helped hundreds of UK businesses deal with creditor pressure, cash flow problems and insolvency. We can provide the expert, confidential assistance you need to put your business back on track.

There may be more options available to your company than you realise. Your company may be able to enter into a CVA with its creditors, use administration to avoid being liquidated, or make use of emergency financing to generate cash flow and pay off its overdue debts.

We examine your company’s finances in detail to find out what’s causing its financial distress, and then work out the best way to help your company recover. Even if your business is under severe stress, there may be a solution that can help it become viable again.

Contact us to speak to an insolvency practitioner and learn more about the options that may be available to your company. We can provide the help and assistance your company needs to get through short-term financial issues and avoid being liquidated in order to pay its creditors.