Twice in 2 days!

I see this a lot…

But twice in 2 days!!!?

What am I talking about?

Small business owners with a company that’s really struggling financially, where there is no option but to close, who have been to an insolvency practitioner who has advised them that:

  1. Creditors’ Voluntary Liquidation is the route to go.
  2. They need that particular firm of IPs to carry out that CVL.
  3. The director(s) / owner(s) of the company need to personally pay for the liquidation, in one instance using the services of a company who will put in their redundancy claim to the RPS then send the money to the IP, in the other, just out of money they must go away and find!

This is appalling advice from the IP.  It’s aimed at one thing only, and that’s earning themselves a fee.  It’s nothing at all to do with providing the best advice to the client.

The point is when any IP is first consulted, our prime duty lies in providing the best advice to the person who has come to see us.  Sure that changes if we are subsequently appointed as say liquidator, but right there and then at that first stage our prime duty is owed to the person sitting in front of us.  And that means not trying to feather our own nest to the exclusion of providing best advice to that person.  Yet it happens… often…

Read this article if you have been asked to personally pay the IP’s costs – Click here.

If you are seeking best advice, either first time (you’ve not yet seen an IP) or second time because what you’ve been told by an IP simply dos not sound right, then call and come and see me.  The initial meeting is free, even if it’s just a second opinion you are looking for.  Why not take a second opinion if you have already taken advice from an insolvency practitioner that just does not sound right? – because after all the decisions you are making now are very important and once acted upon can often not be undone.

My number is 07813 102014.  And the phone is always on.

Paul Brindley

Insolvency practitioner covering Dudley, Wolverhampton, Walsall and the Black Country

insolvency practitioner based in the Midlands

BEWARE! – What you’re not told could be more important than what you’re being told!

Before I go on, I’ll apologise now, this is going to be a rant!  … about some of my fellow insolvency practitioners…

What is it that has upset me so much?

It’s licensed insolvency practitioners telling people they need work doing by them when they don’t.

Here’s an example, it’s one I see often…

You’ve a small limited company – you’re both director and its sole shareholder – it’s got little or no assets, it’s ceased to trade, but it’s got some debts it can’t hope to pay.  The people it owes money to include a handful of trade suppliers, the government for vat, and a bank.  The debts total £25,000.  You’ve guaranteed the bank, who are owed £5,000, you’re going to have to pay that off.  You’ve already put £10,000 of your money into the company, you can’t afford to put any more money into it, it’s clear the business has nowhere to go, the project simply hasn’t worked.  You’ve lost all you can afford to lose and still you have to pay off the bank.

So you go to see an insolvency practitioner.  He advises you that the company should go into liquidation, a process called a ‘Creditors’ Voluntary Liquidation’ because it’s the cheapest and simplest way to shut the company down. He tells you it’s your duty as a director, or shareholder, to close the company down in this way. And because it has no assets you’ll have to pay for the process, it’ll cost £5,000 thank you.  You pay some money up front, he’ll accept the rest over time, you’ve signed a personal guarantee.

The problem is what he has told you is rubbish… pure and unadulterated rubbish…in fact it’s worse than that, it’s downright negligent advice.

You see, there’s nothing in the law to say that you, either as a director or shareholder, have to put the company into liquidation, nor that you have to fund that liquidation.  The reality is that as a director, your obligation is to ensure the creditors’ position does not get any worse.  And you can achieve that most times simply by stopping trading.  As a shareholder, you have no obligation whatsoever, the duties that exist lie with the directors not you as a shareholder – look at it this way, you’ve got shares in Barclays, what obligation does that give you for either the way its run or for putting it into liquidation should it ever become insolvent? – that’s right, none – and the same principles apply to small limited companies as listed ones.

So why did you just throw good money after bad paying for an insolvency process you have no obligation of paying for?  Especially when (1) you’ve probably also lost your only source of income; (2) You have a string of other personal and personally guaranteed company debts you are struggling paying; and (3) You’re trying to set up a new business to earn some dosh?

Do you know what I do under these circumstances?… that still enables you to comply with your duties as a director?  … that costs just £10 plus the cost of a stamp to write to each of your creditors?

Well, I give you – free of charge – a copy of what I call my ‘no assets letter’ – a letter that you send to the company’s creditors, telling them the company has ceased trading, explaining the company’s financial position, inviting them to put the company into an alternative process called a compulsory liquidation and advising that unless they do so within the next three months, you’ll apply to have the company struck off.

The point is a compulsory liquidation is a process that is started at the creditors’ cost and continued at the government’s cost It costs you nothing.

And in 3 months time if creditors haven’t started off that process, you simply fill in the appropriate Companies House form (DS01 – here’s a link to it) and send it, together with a cheque for just £10 to the Registrar of Companies, who should then strike the company off.  You’ve saved yourself £5,000…and you have still complied with your duties as a director.

And that’s why I say that sometimes the most important things are those which you’re not told…

The question you need to ask is why this is happening?  Sometimes it’s ignorance – the IP or his staff are simply incompetent – yes there are a lot of incompetent insolvency practitioners and their staff out there!  But as I am seeing this happen more and more as sales volumes in the insolvency profession come under pressure, I think it’s down to far more than mere ignorance.  It’s fee hungry insolvency practitioners compromisiong the quality of the advice they give purposely to earn themselves a fee.  And that is a country mile away from providing their clients with best advice.  What makes it worse is that their clients are paying for such poor advice, even though in many instances they can’t really afford to do so.

In my next blog I’ll talk to you about what those salesmen of Individual Voluntary Arrangements don’t tell you, and give you an opportunity to obtain ‘my little book of bankruptcy’, a book that explodes some of the myths about bankruptcy.

 

BEWARE! – What you're not told could be more important than what you're being told!

Before I go on, I’ll apologise now, this is going to be a rant!  … about some of my fellow insolvency practitioners…

What is it that has upset me so much?

It’s licensed insolvency practitioners telling people they need work doing by them when they don’t.

Here’s an example, it’s one I see often…

You’ve a small limited company – you’re both director and its sole shareholder – it’s got little or no assets, it’s ceased to trade, but it’s got some debts it can’t hope to pay.  The people it owes money to include a handful of trade suppliers, the government for vat, and a bank.  The debts total £25,000.  You’ve guaranteed the bank, who are owed £5,000, you’re going to have to pay that off.  You’ve already put £10,000 of your money into the company, you can’t afford to put any more money into it, it’s clear the business has nowhere to go, the project simply hasn’t worked.  You’ve lost all you can afford to lose and still you have to pay off the bank.

So you go to see an insolvency practitioner.  He advises you that the company should go into liquidation, a process called a ‘Creditors’ Voluntary Liquidation’ because it’s the cheapest and simplest way to shut the company down. He tells you it’s your duty as a director, or shareholder, to close the company down in this way. And because it has no assets you’ll have to pay for the process, it’ll cost £5,000 thank you.  You pay some money up front, he’ll accept the rest over time, you’ve signed a personal guarantee.

The problem is what he has told you is rubbish… pure and unadulterated rubbish…in fact it’s worse than that, it’s downright negligent advice.

You see, there’s nothing in the law to say that you, either as a director or shareholder, have to put the company into liquidation, nor that you have to fund that liquidation.  The reality is that as a director, your obligation is to ensure the creditors’ position does not get any worse.  And you can achieve that most times simply by stopping trading.  As a shareholder, you have no obligation whatsoever, the duties that exist lie with the directors not you as a shareholder – look at it this way, you’ve got shares in Barclays, what obligation does that give you for either the way its run or for putting it into liquidation should it ever become insolvent? – that’s right, none – and the same principles apply to small limited companies as listed ones.

So why did you just throw good money after bad paying for an insolvency process you have no obligation of paying for?  Especially when (1) you’ve probably also lost your only source of income; (2) You have a string of other personal and personally guaranteed company debts you are struggling paying; and (3) You’re trying to set up a new business to earn some dosh?

Do you know what I do under these circumstances?… that still enables you to comply with your duties as a director?  … that costs just £10 plus the cost of a stamp to write to each of your creditors?

Well, I give you – free of charge – a copy of what I call my ‘no assets letter’ – a letter that you send to the company’s creditors, telling them the company has ceased trading, explaining the company’s financial position, inviting them to put the company into an alternative process called a compulsory liquidation and advising that unless they do so within the next three months, you’ll apply to have the company struck off.

The point is a compulsory liquidation is a process that is started at the creditors’ cost and continued at the government’s cost It costs you nothing.

And in 3 months time if creditors haven’t started off that process, you simply fill in the appropriate Companies House form (DS01 – here’s a link to it) and send it, together with a cheque for just £10 to the Registrar of Companies, who should then strike the company off.  You’ve saved yourself £5,000…and you have still complied with your duties as a director.

And that’s why I say that sometimes the most important things are those which you’re not told…

The question you need to ask is why this is happening?  Sometimes it’s ignorance – the IP or his staff are simply incompetent – yes there are a lot of incompetent insolvency practitioners and their staff out there!  But as I am seeing this happen more and more as sales volumes in the insolvency profession come under pressure, I think it’s down to far more than mere ignorance.  It’s fee hungry insolvency practitioners compromisiong the quality of the advice they give purposely to earn themselves a fee.  And that is a country mile away from providing their clients with best advice.  What makes it worse is that their clients are paying for such poor advice, even though in many instances they can’t really afford to do so.

In my next blog I’ll talk to you about what those salesmen of Individual Voluntary Arrangements don’t tell you, and give you an opportunity to obtain ‘my little book of bankruptcy’, a book that explodes some of the myths about bankruptcy.