Pre-Insolvency
Period
Pre-Insolvency Period 2018-11-02T13:18:42+00:00

Pre-Insolvency Period – The Twilight Zone

The earlier you can spot the signs of distress, the better.  The more time you give yourself and the more assets and resources you have available will give you a better chance of making the changes necessary to turn the business around.  The ‘Twilight Zone’ is the period between the company having financial issues and either returning to profitability or entering a formal insolvency process.

Please click on the link to download a copy of our Company Brochure – Coyne Consultancy Company Brochure.

In reality this period could be at least 2 years before an insolvency would likely occur given the powers available to Insolvency Practitioners to look back at any actions taken by directors over this time period.

You can never take advice too early but it is very easy to leave it too late.  If you wait until the bailiffs are at the door, you can’t pay the wages tomorrow or have defaulted on a ‘time to pay’ arrangement with HMRC your options will be limited and a formal insolvency may be unavoidable.

In my experience (and I have the grey hairs to prove it) when financial problems arise, or the prospect of insolvency looms, however remote, it becomes more difficult for directors to make rational judgements during this ‘Twilight Zone’, should the company stop trading and if so when?

This Twilight Zone is of fundamental importance to directors.  Whilst the government may wish to encourage entrepreneurs, the harsh reality is that Insolvency and Company law does not favour a director who trades on to the detriment of creditors when a company is either insolvent or close to it.

This puts directors who already have many duties in an invidious position as their duties will change to include a duty to act in the best interests of creditors until  the company’s future is determined, leaving them open to claims of:

  • wrongful trading
  • misfeasance
  • preferences
  • disqualification
  • personal liability

The courts place great reliance on those directors who seek and obtain competent and independent advice from a Licensed Insolvency Practitioner…but all of this creates a number of problems for both the courts and the professional advisors.

The courts place great reliance on those directors who seek and obtain competent and independent advice from a Licensed Insolvency Practitioner…but all of this creates a number of problems for both the courts and the professional advisors.

  • When is a company insolvent?
  • Have the directors taken every step to minimise the potential loss to creditors?
  • A Licensed Insolvency Practitioner deals with often competing interests, his main duty, however, is to the creditors of the company and he alone brings the above actions against directors. Can he be truly independent? A Licensed Insolvency Practitioner cannot serve two masters.

I suspect most directors will have no knowledge of IPs, whether good, bad or indifferent.  It is little wonder that there is a stigma attached to insolvency and IPs and that directors should be fearful of them.  So if you are a director who needs expert advice to protect yourself and your family do you:

  1. Seek the advice of an Insolvency Practitioner who has a vested interest in the subsequent formal appointment and will be the very person who will be charged by the creditors with responsibility to take action against you if appropriate? Or
  2. Seek my advice as an experienced former appointment taker, who has no vested interest in future insolvency fees, and is on your side, to protect your interests and to help you avoid any criticism during the Twilight Zone.

Many of the steps I can advise you on are commonsense measures which are often ignored to the director’s detriment.  Not only can I help you implement strategies which will serve as a framework for managing a company in the Twilight Zone, I will also put these in writing to you. They will help to protect you from any criticism in the event the company cannot exit the Twilight Zone except through an insolvency procedure.

For help and advice if you believe your business is in the pre-insolvency period, please contact me or call me on 07778 999888 for an initial discussion, free, and with no obligation.