Working to help business recover from Covid-19
4 Factors for you to look for when appointing good Insolvency Practitioners
Recent research by Santander suggests that 8% of small businesses will not survive the pandemic. To date, the number of business failures caused by the pandemic has been low, and this is thanks to the significant scale of Government support. However, a recent study by the Institute of Public Policy Research, echoing Santander’s research, suggests that more than half a million companies (especially small businesses in the hospitality, food and other specialist service sectors) have already reached the tipping point and are at risk of collapsing by the Spring unless the Government extends support schemes until the economy has fully reopened. Such companies will be showing the classic signs of financial distress and possible insolvency: poor cash flow, creditor pressure and extended debtor or creditor days. The stress of such situations can often impact negatively on the mental well-being of directors and staff. As insolvency practitioners, the earlier we are consulted, the more we can do to help a business restructure and survive. However, sometimes liquidation is the only option. But what makes a good insolvency practitioner? Aren’t All Insolvency Practitioners the Same?
The answer, of course, is no. Our Licensed Insolvency Practitioners, from across our 7 offices (London, Bournemouth, Brentwood, Croydon, Reading/Thames Valley, Salisbury and South West & Wales) know that technical knowledge and financial expertise are central to any appointment. However, there are four other factors which are crucial in choosing the right insolvency practitioner/liquidator for a job, based on a survey we did in late 2020. They are: experience, reputation and trust, having a practical approach and results/outcomes.
It is not just the length of an Insolvency Practitioner’s experience; it is also the quality of it that counts. Here at Antony Batty, all of our Licensed Insolvency Practitioners worked for either one of the Big 4 or ‘Grade A’ accountancy firms (specialising in insolvency) before joining us, working across a wide range of industry sectors.
Such specialist experience can help an IP to identify the causes of a business’s difficulties more quickly and accurately, allowing the right solution to be put in place, if turnaround is possible. The same experience is also invaluable if liquidation is the outcome.
Even with liquidation, the earlier that the decision to liquidate is taken – a creditors voluntary liquidation – the better. The alternative is a compulsory company liquidation (or compulsory winding up), which is instituted by an order made by the court, usually on the petition of a creditor or a shareholder.
Reputation and Trust
Due to the nature and sensitivity of their duties, it is vital for Insolvency Practitioners to be open and honest in all their dealings. The importance of the task at hand, the outcome of which impacts on jobs and livelihoods, requires complete transparency and integrity.
A good IP, therefore, must gain the trust of all key parties. As a result, this will assist the directors to achieve the best possible outcome. It is, of course, this trust (and the results achieved) that is so important in building a positive reputation.
Having a Practical Approach
All businesses are different, so having a practical approach to understand them and how they work is always our starting point. Our first step is to see if the business can be turned around or restructured, even if liquidation proves to be the ultimate outcome. Of course, many of the problems that businesses encounter are the same, although their severity and the potential solutions differ from business to business. These include: cash flow problems, difficulties in paying HMRC and other creditors, problems with raising additional finance and late payments.
Once liquidation is agreed as the course of action, understanding the business and its people helps make the liquidation as orderly and painless as possible.
It is no good identifying the practical – and right – course of action for a business if the Insolvency Practitioner cannot communicate it effectively to the directors, creditors and other stakeholders. This means, therefore, using jargon-free plain English for one thing.
A good Insolvency Practitioner should always be clear when explaining to directors why it would be appropriate to take their advised route, including liquidation. Consequently, directors will understand what will happen in practice and have no nasty surprises further down the line.
The results/outcomes that are achieved are crucial, whether for directors and staff or creditors, and a good Insolvency Practitioner will keep business rescue and turnaround at the forefront of discussions, rather than seeing liquidation and closure as the only options.
Identifying a range of potential options based on a thorough review of the company’s operations, could help to turn the business around and aid its return to profitability. Keeping an optimistic mind-set can help a great deal at this stage.
Often, a different source of funding can be the key to recovery. Insolvency Practitioners usually have connections with a range of finance providers who can offer alternatives to mainstream funding that businesses in distress might not have heard or thought about. These include leveraging the value of hard assets or sales ledger invoices, for example.
A good Insolvency Practitioner will understand the ramifications for directors of any creditor action, and how it could impact on them as individuals. For that reason, an IP needs to be approachable, and open to answering as many questions from directors as required.
Delivering positive results, therefore, is not just about technical experience and expertise, it’s also about being willing to spend time explaining each stage of a suggested process, liquidation or otherwise, including any potential ‘stumbling blocks’ for directors such as personal liability or accusations of wrongful trading. In a financially distressed environment, we always aim to make the whole situation easier to bear.
Being personable and approachable means that we always have empathy for the stresses and strains experienced by directors. We try to deal effectively with the creditors and negotiate the best possible outcome given the circumstances.
We have been around since 1996 and have handled more than 2,500 insolvency cases, including liquidations, administrations and Company Voluntary Arrangements, across many industry sectors. We welcome you to look at some of our testimonials to see the results we have achieved and what our clients have said.
Contact our Insolvency Practitioners for an Initial Free Discussion
If your business or a business you know is in distress, give us a call. We want to help UK businesses and directors bounce back or help them start on their next journey. If you are looking to appoint an insolvency practitioner, why not contact us for a free consultation at any of our offices: