Frequently Asked Questions

About Hart Shaw Business Recovery and Insolvency

The initial consultation is always free and without obligation. We will advise you of the best solution for your personal circumstances and will set out clearly any costs that are payable. It is usually the case that our fees are in effect paid by creditors out of the funds that are realised to pay them and therefore no fees are payable by you.

We have a partner led approach to solving peoples problems and you will see either Christopher Brown or Andrew Maybery. They will be assisted by a manager and senior administrator who will deal with some of the administrative tasks.

We will speak to you promptly without delay and will meet with you at your earliest convenience, if need be on the same day. We understand and appreciate the time pressures that you face and will respond to them.

Liquidations

As a general rule the directors of a limited company in liquidation will not become liable for the company’s debts unless they have given a specific personal guarantee. However, in certain circumstances, a director may become personally liable if he or she has committed certain offences such as wrongful trading, preferences or transactions at an undervalue. It is therefore vitally important that the directors of an insolvent company take professional advice as early as possible to ensure the do not unwittingly commit any offences. At Hart Shaw Business Recovery and Insolvency, we will advise you on your responsibilities and duties as a director to minimise this risk.

It is a requirement for the company’s director to attend and Chair the meeting of creditors when the company is placed into Creditors Voluntary Liquidation. In practice the liquidator will run the meeting and do most of the talking and the director will only have to answer any questions that are asked. It is often the case that creditors do not attend creditors meetings in person but submit proxy forms for the chairman to vote. If creditors do attend there are usually only one or two and therefore creditors meetings are nothing to worry about.

Should it be necessary to declare some or all of your employees redundant, any claim that they may have for arrears of pay, holiday pay, notice pay or redundancy pay will, subject to certain limitations, be paid out of the Redundancy Fund. If the business can be sold and jobs are saved, the employees will be transferred to the new employer and their accumulated employee rights will be protected under the Transfer of Undertaking Protection of Employment regulations (TUPE).

Yes. The duty of a liquidator is to sell the assets for the best possible price. If the best offer received is from the director, there is no reason why the liquidator should not accept it. If a director purchases the assets this should be brought to the attention of the creditors either at the creditors meeting or in subsequent reports.

Section 216 of the Insolvency Act 1986 restricts the re-use of a company name or trading style in order to protect the public interest. If this section is contravened the director faces potential personal liability and possible criminal prosecution. Names may be reused in certain circumstances but as this is a complex area you should seek professional advice at an early stage.

Section 216 of the Insolvency Act 1986 restricts the re-use of a company name or trading style in order to protect the public interest. If this section is contravened the director faces potential personal liability and possible criminal prosecution. Names may be reused in certain circumstances but as this is a complex area you should seek professional advice at an early stage.

The liquidator of a company will investigate the affairs of the company and the events leading to its liquidation. If the liquidator discovers evidence of unfitness, a report on the conduct of the director will be issued to the Secretary of State who will decide whether it is in the public interest to commence disqualification proceedings. Areas of unfitness might include:

  • Trading the company whilst insolvent to the detriment of creditors (wrongful trading).
  • Committing a Preference, where certain creditors are paid in preference to others.
  • Committing a Transaction at an Undervalue where assets are sold at less than their true value.
  • Taking deposits knowing that orders will not be fulfilled.
  • Reusing a company name in breach of Section 216 of the Insolvency Act 1986.
  • Not keeping proper books and records or filing accounts.

Company Voluntary Arrangements

A Company Voluntary Arrangement is basically a deal between the company and is creditors which satisfies the company’s outstanding debts. The Company will usually make specific payments for a period of time after which its outstanding liabilities will be written off. The company is thus able to continue trading and creditors receive a greater dividend than if the company had simply been liquidated.

The proposal for a Company Voluntary Arrangement is sent to all creditors and a meeting takes place at which the proposal is either agreed or rejected. To be agreed a majority of 75% by value of those creditors who vote is required. Creditors may vote either in person or by proxy and it is only the claims of those creditors who actually vote that are counted. Therefore if only a minority of creditors bother to vote but they vote in favour, the proposal for a Company Voluntary Arrangement is approved and is binding on all creditors, including the majority who did not vote.

Should it be necessary to declare some or all of your employees redundant, any claim that they may have for arrears of pay, holiday pay, notice pay or redundancy pay will, subject to certain limitations, be paid out of the Redundancy Fund. If the business can be sold and jobs are saved, the employees will be transferred to the new employer and their accumulated employee rights will be protected under the Transfer of Undertaking Protection of Employment regulations (TUPE).

The company is expected to honour its obligations under the Company Voluntary Arrangement. However, if the company’s circumstances materially change such that it can not honour its commitments, a further meeting of creditors could be convened at which the terms of the Arrangement could be modified. For a modification to be accepted a majority of 75% by value of those voting is required.

Section 216 of the Insolvency Act 1986 restricts the re-use of a company name or trading style in order to protect the public interest. If this section is contravened the director faces potential personal liability and possible criminal prosecution. Names may be reused in certain circumstances but as this is a complex area you should seek professional advice at an early stage.

Yes. Section 216 of the Insolvency Act 1986 which restricts the re-use of a company name or trading style only applies when the company is placed into liquidation. Directors of a company in Voluntary Arrangement will therefore be free to use the same or similar name for other business ventures.

Yes. The approval of a Company Voluntary Arrangement has no bearing on the your status as a director. No investigation will take place into the affairs of the company and the events leading up to the Voluntary Arrangement being proposed. No report is issued to the Secretary of State and therefore there is no prospect of a disqualification order being sought under the Company Director Disqualification Act 1986.

Individual Voluntary Arrangements

An Individual Voluntary Arrangement is basically a deal between you and your creditors which satisfies your outstanding debts. Although each Voluntary Arrangement will vary depending on the individual circumstances, it will usually involve the payment of voluntary contributions for a period of up to five years. At the end of the Voluntary Arrangement any outstanding debts will be written off and you will be debt free.

The amount you pay will be what you can reasonably afford. Your income and expenditure will be examined and an assessment will be made of what surplus income is available to be paid into the Voluntary Arrangement for the benefit of creditors. You will only pay what you can reasonably afford and no fees will be payable to us by you. Our fees are paid by agreement of creditors out of the Voluntary Arrangement fund.

An Individual Voluntary Arrangement will usually take around six to seven weeks from you first contacting us to the Arrangement being agreed by creditors. The information gathering and the writing of the proposal will take two to three weeks and creditors require between two and four weeks notice. Once approved the Voluntary Arrangement will usually last five years after which you will be debt free. However, lump sum Voluntary Arrangements which do not involve monthly payments can be concluded in less than six months.

The proposal for an Individual Voluntary Arrangement is sent to all creditors and a meeting takes place at which the proposal is either agreed or rejected. To be agreed a majority of 75% by value of those creditors who vote is required. Creditors may vote either in person or by proxy and it is only the claims of those creditors who actually vote that are counted. Therefore if only a minority of creditors bother to vote but they vote in favour, the proposal for an Individual Voluntary Arrangement is approved and is binding on all creditors, including the majority who did not vote.

There is no longer a requirement for you to attend the meeting of creditors, although of course you may do so if you wish. You will need to be contactable so that you can confirm your agreement to any modifications that are proposed. In practice creditors usually vote by proxy and so it is unusual for a creditor to attend in person.

Your are expected to honour your obligations under the Individual Voluntary Arrangement. However, if your circumstances materially change such that you can not honour your commitments, a further meeting of creditors could be convened at which the terms of the Arrangement could be modified. For a modification to be accepted a majority of 75% by value of those voting is required. If the request for a modification is rejected and you can not meet the original terms, the Arrangement will be declared a failure and this may lead to you being declared bankrupt.

One of the advantages of an Individual Voluntary Arrangement over Bankruptcy is that you are able to retain assets such as your house and so you will not usually have to sell your house. If you have substantial equity in your house you may be required to release some of it for the benefit of creditors by, for example, re-mortgaging. Provided you continue paying your mortgage and are able, if required, to release some of the equity, your house will be safe. If you have any concerns with this issue please contact us for further advice.

Bankruptcy

If you are insolvent and wish to declare yourself bankrupt you make an appointment with your local Court, complete the appropriate forms and pay the Court fee. The forms to petition for your own bankruptcy can be obtained from www.insolvency.gov.uk

Your bankruptcy will normally be discharged automatically after one year although the Official Receiver may apply to Court for an earlier discharge if your affairs are straightforward. In certain circumstances your bankruptcy discharge could be suspended by the Official Receiver if you failed to cooperate with your Trustee or the Official Receiver.

A bankrupt must not:

  • Obtain credit for more than £500 from any person without disclosing to that person the fact that he is bankrupt.
  • Trade a business in any name other than the name is which he was declared bankrupt.
  • Act as a company director or be involved with the management of a company without leave of the Court.
  • Hold certain public offices.

You will lose your assets which will be realised for the benefit of your creditors. You will be able to retain certain assets such as your domestic goods and chattels and the tools of your trade.

You will lose the equity in your house which will be realised for the benefit of your creditors. However, a Trustee in Bankruptcy will only sell the house as a last resort and will usually give you time to raise funds to buy back your equity in the house. Provided you continue paying your mortgage and are able raise sufficient funds to buy back the equity, you should be able to keep your house. If you have any concerns with this issue please contact us for further advice.

The Official Receiver or Trustee in Bankruptcy will examine your income and expenditure and if he assesses that you have a surplus over that which is required to meet your reasonable needs, he will require from you monthly income payments for a period of up to three years. This will be either by agreement with your or if agreement can not be reached by way of a Court Order.

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