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Understanding Corporate Insolvency Solicitors

A company is considered insolvent when its assets are not enough to pay for debts and liabilities. Most companies are considered insolvent when they are unable to pay their debts due to a lack of cash flow or their liabilities outweigh their assets.
The directors of insolvent companies owe their duties to the company creditors, not the shareholders. Directors who are worried about the financial position of the company must consider how they act very quickly and take specialist advice from a corporate insolvency solicitor, who is knowledgeable and experienced in insolvencies, offering legal advice and assistance. In the event an insolvent company goes into liquidation or administration, the directors can be sued in their personal capacities for their creditors’ losses, should they decide to continue trading knowing their business is in serious financial distress, which is known as wrongful trading.
The Department for Business, Energy and Industrial Strategy will bring the director to disqualification proceedings which in addition to any liability, it is also considered a breach of duty to the company.
An ...
... option for an insolvent company is administration. This is when the company is protected from the creditors who are enforcing their debts. An administration practitioner takes over the management of the company’s affairs and trading. They operate the company to reorganise it, selling some assets in order to repay any debts. In some cases, a deal to sell the business or assets is negotiated prior to the administrator being appointed. This is known as a pre-packaged administration sale.
Liquidation is different from administration and it is when the business assets are placed under the control of a liquidator. This means the company must stop trading immediately. The liquidator sells the company assets and distributes what is made to pay back the creditors.
Then there is a company voluntary arrangement, which is an arrangement or restructuring plan that comprises its debts and agrees on an arrangement to repay them. It is essential that the creditors approve of the arrangement, binding the creditors, except those that have security over any of the company assets. The scheme of apartment or Part 26A restructuring plan can be considered, rather than a company voluntary arrangement. It is the successful implementation and court-sanctioned agreement between the business and its creditors.
Businesses have the ability to take advantage of the Part A1 moratorium, which gives the owners some breathing space while they try and find a way to get out of their financial difficulties. During this time, creditors are unable to take action and must continue supplying goods and services. The company and suppliers must come to an agreement. The Part A1 moratorium is part of the Insolvency Act 1986.
Receivership is when a receiver is appointed to sell the assets in question and pay the proceeds to a charge holder for secured debt. This is known as administrative receivership.
With many businesses having faced difficult times over the past few years due to the coronavirus pandemic, being faced with insolvency is a very hard pill to swallow. It is always recommended to speak to a solicitor who can assist with documentation, and agreements and provide legal advice and pitfalls associated with the different insolvency options, enabling you to make the best-informed decision for you, your business and your family moving forward.
Choose a solicitor with extensive corporate insolvency experience, giving you peace of mind that you will make the best decision for your future.
About Us:
Grant Saw Solicitors LLP is a London based solicitor that provides legal services to private and business clients. The firm has been operating since 1851 offering legal excellence and a modern and friendly approach. They are recognised for their excellence with numerous accreditations. Being members of Lawnet, they share ideas and resources. Grant Saw Solicitors LLP are based in Blackheath and Greenwich, both offering disabled access. Their extensive range of legal services ranges from tenant and landlord disputes to residential property transfer, commercial property, insolvency, employment and dispute resolution. Full details can be found at https://grantsaw.com.
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