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Insolvency Solicitors: A Short Guide

insolvency solicitors

What is insolvency?

Insolvency refers to a financial situation where individuals or organisations are unable to meet their financial obligations and pay debts when they are due. It typically occurs when liabilities exceed assets.

Insolvency can lead to various legal and financial consequences, including bankruptcy proceedings, restructuring of debts, or liquidation of assets to repay creditors.

Our insolvency solicitors have many years of experience regarding insolvency matters and work hard to ensure the best outcome is obtained on your case. If you would like some expert advice or more information about our commercial law services, then please do not hesitate to call us today.

Types of insolvency

Insolvency can be broadly categorised into two main types: insolvency for individuals and corporate insolvency.

For Individuals:

Bankruptcy: A bankruptcy order is a formal legal process applicable to individuals who are unable to repay their debts. It involves either the liquidation of assets to pay creditors (known as bankruptcy under the Insolvency Act 1986) or the creation of a repayment plan (known as an Individual Voluntary Arrangement, or IVA). Bankruptcy petitions are overseen by the Insolvency Service and can provide relief from overwhelming debt while ensuring fair treatment for creditors.

Individual Voluntary Arrangement (IVA): An IVA is a legally binding agreement between an individual and its creditors to repay debts over a fixed period, typically five years. It allows individuals to avoid bankruptcy while making affordable payments based on their income and expenses.

Debt Relief Orders (DROs): DROs are a form of insolvency available to individuals in England, Wales, and Northern Ireland who have low income, minimal assets, and debts below a certain threshold. They provide relief from debt for those who cannot afford to repay it and have few assets to liquidate.

For Businesses:

Corporate Insolvency: This is a general term for a company that is unable to pay its debts. There are various formal insolvency procedures available depending on the specific circumstances.

Administration: This is a procedure where an insolvency practitioner is appointed to take control of the company. The aim of administration is to try and rescue the company as a going concern, meaning to keep it operational. The administrator will try to find a way to turn the company around, such as restructuring debts, selling assets, or finding a buyer for the business.

Liquidation: This is the process of winding up a company’s affairs, often via a winding up petition. The company’s assets are sold off, and the proceeds are used to repay creditors as much as possible. Once all assets have been sold, the company is then dissolved.

What is the role of an insolvency solicitor?

The role of an insolvency solicitor is to provide expert legal guidance and representation to clients navigating the complexities of insolvency, with the aim of achieving the best possible financial outcomes. Some key responsibilities and roles of an insolvency solicitor include:

  • Legal advice: An insolvency solicitor provides legal advice to individuals or businesses facing financial difficulties.
  • Choosing the right insolvency procedure: Insolvency solicitors help clients understand the different insolvency procedures available to them and assist in selecting the most appropriate course of action based on their specific circumstances and objectives.
  • Initiating insolvency proceedings: Insolvency solicitors handle the preparation and filing of necessary paperwork or petitions to initiate insolvency proceedings, whether it’s bankruptcy, an Individual Voluntary Arrangement (IVA), a Debt Relief Order (DRO), or corporate insolvency procedures like administration or liquidation.
  • Representation in Court: In cases where insolvency proceedings involve court appearances or hearings, insolvency solicitors represent their client’s interests before the court. They argue on behalf of their clients, present evidence, and ensure that their rights are protected throughout the legal process.
  • Negotiation and mediation: Insolvency solicitors negotiate with creditors, insolvency practitioners, and other parties involved in the proceedings to achieve favourable outcomes for their clients. They may negotiate repayment terms, settlements, or restructuring arrangements to help their clients resolve financial difficulties.
  • Asset protection: In corporate insolvency cases, insolvency solicitors advise company directors and stakeholders on their duties and responsibilities to protect company assets and mitigate personal liability risks.
  • Legal compliance: Insolvency solicitors ensure that their clients comply with relevant laws, regulations, and court orders throughout the insolvency process. They help navigate complex legal requirements and deadlines to avoid potential pitfalls or legal consequences.
  • Dispute resolution: Insolvency solicitors assist clients in resolving disputes that may arise during insolvency proceedings, whether it’s disputes with creditors, employees, directors, or other stakeholders. They use their legal expertise to negotiate settlements or, if necessary, represent clients in litigation to resolve disputes effectively.
  • Recovering debts for creditors: An insolvency solicitor can also assist in cases where an insolvent company owes money to a creditor. We can assist in the process of issuing statutory demands, winding up petitions, and bankruptcy proceedings.

Insolvency disputes

Insolvency disputes can arise in various contexts during insolvency proceedings, involving disagreements between parties involved in the process. Common types of insolvency disputes include:

Creditor Disputes

Creditors may dispute the validity or priority of their claims in insolvency proceedings. This could include disagreements over the amount owed, the enforceability of security interests, or the treatment of certain debts in the distribution of assets.

Director Disputes

In corporate insolvency, directors may face disputes related to their conduct leading up to insolvency. Creditors or insolvency practitioners may allege misconduct, such as wrongful trading, fraudulent trading, or breaches of duty, and seek to hold directors personally liable for losses incurred by the company.

Employee Disputes

Employees affected by corporate insolvency may have disputes regarding unpaid wages, redundancy payments, or other employment-related entitlements. They may seek to recover unpaid amounts through insolvency proceedings or pursue claims against directors or the insolvent company.

Shareholder Disputes

Shareholders of an insolvent company may dispute the actions taken by directors or insolvency practitioners, especially if they believe their interests have been unfairly prejudiced or their rights have been disregarded during the insolvency process.

Insolvency Practitioner Disputes

Disputes may arise between insolvency practitioners appointed to oversee the insolvency process and other stakeholders, such as creditors, directors, or shareholders. These disputes could involve disagreements over the handling of assets, the distribution of proceeds, or the conduct of the insolvency practitioner.

Voidable Transactions

Insolvency disputes may involve transactions that are potentially voidable under insolvency law, such as preferences, transactions at an undervalue, or transactions defrauding creditors. Insolvency practitioners may seek to set aside these transactions to recover assets for the benefit of creditors, leading to disputes with parties involved in the transactions.

Disputes over Insolvency Plans

Parties involved in insolvency proceedings may dispute proposed insolvency plans, such as voluntary arrangements or restructuring proposals. Creditors or other stakeholders may challenge the feasibility or fairness of the proposed plan, leading to negotiations or court hearings to resolve the dispute.

Resolving insolvency disputes often requires legal expertise and may involve negotiation, mediation, arbitration, or litigation, depending on the nature and complexity of the issues involved.

How can South Bank Legal assist?

Our team of commercial insolvency solicitors are highly experienced and can provide advice on how to deal with insolvency matters.

Our insolvency solicitors advise on:

  • company administration
  • receivership
  • liquidation (winding up)
  • individual bankruptcy
  • statutory demands as a means of debt recovery
  • setting aside statutory demands
  • winding up petitions and bankruptcy petitions
  • validation orders
  • pursuing and defending directors in claims for wrongful trading
  • pre pack administration sales
  • transactions at an undervalue
  • petitions to wind up companies on the just and equitable ground under section 122(g) of the Insolvency Act 1986
  • provision of information to liquidators under section 235 of the Insolvency Act 1986

 

Our solicitors can also provide specialist legal services on a wide range of other issues related to commercial disputes. These include intellectual property disputes, multi-million-pound shareholder disputes, commercial contract disputes and property disputes.

If you would like more legal advice on insolvency matters or wish to discuss any of our services, you can contact our law firm using the form below or telephone 02035765179 for a confidential discussion with one of our specialist solicitors.

 

Get in touch today

 

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