In any insolvency proceedings, once appointed, our role is to act on behalf of all creditors equally. To this end, there are several documents that are sent to the creditors, and whilst we require to set out the legislation, I have always been in favour of ‘tabloid style’ communication for creditors. In many cases, we face creditor apathy. This can sometimes lead to making our role difficult – as we act on behalf of creditors, we often need their input, but when faced with mountains of paperwork, I can understand why this may turn people off responding! In my experience, creditors are most interested in whether they will receive funds back from the process and when. Whilst it is right and proper that they be given lots of information to make decisions, they are also running their own businesses, and even institutional creditors don’t often get involved in the process. There have been significant changes to the legislation to ease the burden of screeds of correspondence to creditors – such as the use of portals which most IPs offer. However, to get the most out of the process for all, I believe that we could go further in this area. Can you share the steps a business should take once they realise they may face insolvency? The main area is to ensure you have limited your potential personal liability and to avoid the pitfalls, the following areas should be considered: 1. You are under a duty to preserve its assets and minimise its liabilities. 2. You must ensure that any action you take will not result in any creditors or members being preferred or given an advantage, in particular connected parties. 3. Further credit must not be taken for any goods or services. 4. You should not accept the delivery of goods already ordered which have not been paid for. 5. No assets should be disposed of, except to the extent necessary to meet essential costs and expenses, and you should take care not to allow any of the company’s creditors to obtain possession of assets pending investigation by a subsequently appointed liquidator. 6. You should not supply any goods or services on credit to existing or potential creditor. 7. Cash or cheques received by the company should be handed over to us for payment into a separate client’s account. 8. Any overdrawn bank account must not be used. 9. Adequate insurance coverage must be maintained. Please advise us immediately if insurance cover expires before the date of the meetings. 10. Company Credit cards should not be used by staff. 11. No payments should be made to existing creditors. 12. Goods should not be dispatched with carriers or hauliers who are owed money. Restructuring and insolvency professionals are well placed to have sensitive conversations surrounding your business – most offer an initial free meeting; in these circumstances, it is best to seek an early conversation to ensure that you protect your own personal position – don’t wait until five to midnight! and There have been significant changes to the legislation to ease the burden of screeds of correspondence to creditors – such as the use of portals which most IPs offer Creditors are most interested in whether they will receive funds back from the process and when. Front Cover Feature 22 Finance Monthly.
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