Helping Accountants with Insolvent Clients

Solvent Limited Company

If your client is operating a limited company and is looking to retire or sell their business, and the company is solvent, then a liquidator (eg Purnells) can be appointed to wind up the company using a Members Voluntary Liquidation.

The assets can be realised, any remaining obligations can be settled, and the balance of funds can be distributed to the shareholders by way of a capital distribution.  More often than not Business Asset Disposal Relief will be available, which can reduce the tax payable by the shareholders to 10%.   A Members Voluntary Liquidation can therefore be a useful tax planning tool to offer to your clients.

Insolvent Limited Company

If your client's limited company is insolvent then there are many options available to them, depending on what they want to achieve.

If your client is looking to save the company and its underlying business, and continue to trade then some of the options they could consider are:

• A Company Voluntary Arrangement
• A Pre-Pack Administration
• A Creditors Voluntary Liquidation with a Phoenix Company

Alternatively, it maybe that your client simply wishes to close down the company and move on, in which case the options available to them are:

• Creditors Voluntary Liquidation
• Compulsory Liquidation
• Administration
• Section 1003 Application

The options available, and their respective pros and cons, are different depending on the company's individual circumstances, which is why advice from a Licensed Insolvency Practitioner is essential, and we are always happy to provide you and your client with a free first meeting and a letter of advice to fully understand your client's needs, and what they are looking to achieve, so that we can better advise them.

Personal / Sole Trader Insolvency

If you have a client that is undergoing personal insolvency and they have exhausted informal negotiation options with their creditors, then we are happy to discuss suitable insolvency solutions either with you or your client directly.

The most common solution for personal insolvency is an Individual Voluntary Arrangement (IVA), which seeks an agreement between creditors for the debt to repaid (in part or in whole, depending) over an agreed timescale to the client's best ability. The arrangement is negotiated by an Insolvency Practitioner (IP - eg Purnells), and once agreed upon the client would pay Purnells the monthly instalments, which we would distribute to the creditors.

If an IVA is not possible (eg. creditors cannot agree, or not enough funds are realisable) then bankruptcy is the next option. Bankruptcy will liquidate any remaining realisable assets that the client has (minus personal allowances) in order to pay off the creditors.

Partnership Insolvency

For basic partnerships (as opposed to Limited Liability Partnerships), every partner has liability for the business debt, and their assets can be called upon to realise it. 

Similar to an IVA, a partnership business may be able to negotiate a Partnership Voluntary Arrangement (PVA) with creditors, which establishes a manageable repayment plan over an agreed time period, providing the situation that led to the debt was just a bump and the business is generally viable. Alternatively, for individual partners there may be a need for IVAs or bankruptcy proceedings if the partners cannot come up with the funds to service the debt.

The partnership could also be liquidated to end the business and realise it's assets to settle the debt, should other options fail and there are enough assets within the business to settle it.