Have you been asked to personally pay the costs of liquidating your company?

A day doesn’t go by without me seeing at least one instance of a director being asked by an insolvency practitioner to personally pay the costs of putting their company into creditors’ voluntary, ie insolvent, liquidation.

If this is you, here’s a few questions for you…

What’s the insolvency practitioner said about your responsibility for paying those costs?

Were all of your options explained to you?

The answer to these questions is typically ‘not a lot’ and ‘I don’t know’, all that was said is ‘a CVL is quicker and more convenient way for you to close down the company’.

It might be, it might not be, but let me ask you another question, and this is the knub…

Can you do something better with your money – typically £2,500, £3,000 or £5,000 – like finance your new business, pay down personal debt, or even take a well earned break – than pay an insolvency practitioner’s fees?

Of course you can, because whatever way you look at it, spending your hard earned money – and I’m even seeing directors who go into personal debt on credit card to pay such fees, even after losing their sole source of income – on dealing with a historic issue isn’t great value for money.  Yes, there are low cost alternatives to a formal insolvency process.

So why is this happening?  Why am I being told that CVL is the best option?

Well, there are 2 reasons.

Firstly, insolvency is a incredibly complicated and grey legal area, it’s ever so easy for an insolvency practitioner to say ‘a CVL is the right route for you’ without that statement really being put to the test.

Secondly, many insolvency firms depend on selling directors what I would argue are bad solutions to survive themselves – unless they pile small CVLs high and sell them cheap, the insolvency firm would itself be bust!

It is time for some uncomfortable truth...

There is nothing in the law that says any director has to use his/her own money to personally pay for the liquidation of their company.

Let’s repeat that so it hits home…

There is nothing in the law that says any director has to use his/her own money to personally pay for the liquidation of their company.

Find any such reference either in statute or case law and I’ll pay you £500.

You see the law only says you have to stop making the creditors’ position any worse.  In most instances you can do that by simply ceasing to trade.

But there’s a problem…

You still you need closure.  You need to close down the business and the company.

The secret that many IPs would like to keep from you is that can be achieved without you throwing your money down the drain.

Calling the boards of insolvent Credit Unions – there’s been a change in the law!

Yesterday, on 6th April, the Industrial & Provident Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014 (SI 2014/229) came into force.

This statutory instrument plugs a yawning gap in the legislation that had previously left credit unions that were struggling financially with few options.  Now they can access the UK’s administration and Company Voluntary Arrangement (CVA) legislation, giving them the same options as most companies.

Click here to be taken to the statutory instrument.

Paul Brindley says ‘this is good news for insolvent credit unions- no longer are they restricted to the more brutal formal insolvency procedures such as insolvent liquidation: it must be in everyone’s interest to use the more positive rescue techniques of administration or CVA to save something of all the good work unions do’ .

Paul was appointed liquidator of South Warwickshire Credit Union in April 2014, twelve months before this instrument was enacted.

 

Calling the boards of insolvent Credit Unions – there's been a change in the law!

Yesterday, on 6th April, the Industrial & Provident Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014 (SI 2014/229) came into force.

This statutory instrument plugs a yawning gap in the legislation that had previously left credit unions that were struggling financially with few options.  Now they can access the UK’s administration and Company Voluntary Arrangement (CVA) legislation, giving them the same options as most companies.

Click here to be taken to the statutory instrument.

Paul Brindley says ‘this is good news for insolvent credit unions- no longer are they restricted to the more brutal formal insolvency procedures such as insolvent liquidation: it must be in everyone’s interest to use the more positive rescue techniques of administration or CVA to save something of all the good work unions do’ .

Paul was appointed liquidator of South Warwickshire Credit Union in April 2014, twelve months before this instrument was enacted.