If you’re watching these videos, you’re likely a UK business owner, and your business is starting to struggle. You might be thinking about finding an insolvency practitioner because if you liquidate a company in the UK, you need an insolvency practitioner. Here are nine signs you need to find another insolvency practitioner.
Licensed insolvency practitioners
When selecting an insolvency practitioner, you must ensure that they are licensed. This can help to ensure that you’re dealing with someone who is insured, qualified and regulated to carry out your job.
Issue 1: They aren’t willing to offer you advice without you paying first.
A great insolvency practitioner would be willing to help a potential client out. They should sit down with you, discuss your circumstances and provide valuable advice. They should be taking the time to understand your position and highlighting any pitfalls you may face personally if you go into liquidation.
Issue 2: They give you a quote without knowing the entire situation.
They might say, “yes, you qualify for insolvency, here’s my invoice”. In this case, you might be left with personal liability further down the line, as they haven’t checked various aspects of your situation. Many people end up being stung by having an overdrawn director’s loan, so you must ensure that they check this before you appoint them.
Issue 3: They speak to you like you’re a naughty child.
Most people that we deal with who are entering liquidation are doing so due to a change in circumstances. A lot of the time, the liquidation is not actually down to them. You need to find a liquidator who treats you with respect and empathy.
Issue 4: They won’t put anything in writing.
Why won’t they offer anything in writing? Well, it could be because the goalposts are going to change when you go into liquidation.
There are some great insolvency practitioners out there. A good insolvency practitioner will do the following:
- Listen to you attentively
- Ask lots of questions
- Understand your position in full
- Check for overdrawn loans
- Check for misfeasance claims
- May complete a bank analysis
- Provide a full proposal – BEFORE you sign any paperwork
Issue 5: They don’t check for overdrawn director’s loans
If they aren’t asking about overdrawn loans, this is a huge red flag. A large percentage of directors that we speak to have overdrawn loan accounts. Simply put, this occurs when you’ve taken too much money from the company.
When making a profit, you take a dividend, which the accountant declares at the end of the year, and you pay the correct tax on the dividend. In contrast, if your business is not making a profit, but you’re still taking dividends, your company cannot afford to pay the dividends, which means that in insolvency, it gets converted into an overdrawn director’s loan. You HAVE to check if you have an overdrawn director’s loan, and if they aren’t mentioning it, that’s a huge red flag.
Issue 6: They tell you not to worry about having inflated your turnover when applying for a bounce back loan.
Despite knowing that you inflated your turnover on the bounce-back loan application, they tell you not to worry about it. This is very bad advice. If you’ve inflated your turnover on the bounce-back loan application, you’ve committed bounce-back loan fraud. The consequences of this are very serious. In the worst cases, you could face prison, a criminal record, director disqualification and personal liability.
There’s absolutely nothing about inflating your turnover that deems the response “there’s nothing to worry about”. You need an insolvency practitioner who will tell you the bad things and what you need to hear, not what you want to hear.
Issue 7: They don’t answer your questions straight.
If you’re asking a straight question, you deserve a straight answer. If they’re often dodging the question or you’re not getting straight answers, it’s a red flag.
Issue 8: They are scaring you into acting fast.
It’s not a good sign if your insolvency practitioner urges you to act fast and makes you feel scared. Remember that there is a caveat here: if you believe your company is facing insolvency, you need to act quickly and get advice, but don’t be pushed into making a decision straight away on who you appoint. You need to ensure that every aspect has been checked before you sign any paperwork.
Take a breath and look into bounce-back loan issues, overdrawn accounts, preference payments, intercompany loans and all those things that could cause concern. If you’re being rushed into signing liquidation papers without these details being checked, it’s a red flag, and it’s time to look for someone else.
Issue 9: They say things like, “We’ll deal with that later down the line.”
The truth is if you deal with something later down the line, it will almost certainly cost you more money and worry. In a liquidation, everything can be dealt with upfront.
We hope you’ve found these signs you need to find another insolvency practitioner useful. There are some great insolvency practitioners out there who do the opposite of all of these signs. Don’t forget that you can contact us for honest, confidential advice on your personal circumstances.
I'm Chris Worden, Managing Director at 1st Business Rescue. With over 7 years of experience, I help UK directors navigate the complex world of UK corporate insolvency. We offer free and independent advice to UK directors and advise them about what options may be available to them if their limited company starts to struggle.
I am passionate about helping other directors overcome their business challenges and get back on their feet, as I was once in the same position as them. I had a business that became insolvent, and the advice out there was confusing and overwhelming. I am here to provide honest and valuable advice to UK directors.
I am proud to say that we are one of the only 5-star corporate insolvency companies on Trustpilot with hundreds of 5-star reviews, and we publish videos weekly on our YouTube channel. Our channel is designed to educate UK directors about insolvency and debt advice. Check it out here:
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