As challenging trading conditions in the UK economy persist, insolvency is a real prospect facing many companies. Businesses are increasingly likely to find themselves dealing with other businesses that are in financial difficulties or even insolvent. In such cases, the need to plan ahead, develop strategies to minimise problems and manage relationships with customers and suppliers should not be underestimated.

This article looks at some of the issues to consider when dealing with companies that are either insolvent or on the brink of insolvency and how to protect your business.

In Scotland claims (e.g. the right to payment) are currently transferred by assignation followed by intimation (i.e. notice) of the transfer to the party which is under an obligation to perform the obligation (e.g. making a payment).

How has HMRC managed its metamorphosis from benevolent supporter of businesses during the pandemic to hard-nosed tax collector?

Four directors have been disqualified for abusing the dissolution process pursuant to powers introduced by the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (the Act). In each case, the director secured a bounce back loan on behalf of their company before taking steps to dissolve the company in an attempt to avoid repaying liabilities under the scheme.

There are various ways to wind up or liquidate a limited liability company. Each method will essentially realise the assets of the company and distribute the proceeds to the company’s creditors or shareholders, but they are individually unique as to the processes that need to be followed.

One such method is a Creditors’ Voluntary Liquidation.

What is a Creditors’ Voluntary Liquidation?

BITE SIZE KNOW HOW FROM THE ENGLISH COURTS

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Introduction

In May 2022, there were a total of 1,817 company insolvencies in England and Wales. Overall company insolvencies in May 2022 were 34% higher when compared to May 2019 (pre-pandemic) and 79% higher than insolvencies recorded in May 2021.

More insolvencies means more directors being issued director questionnaires from liquidators or administrators asking them to explain their prior conduct.

The European Union (Preventive Restructuring) Regulations 2022 have amended the Companies Act 2014 so as to require for the first time in statute that directors of companies unable, or likely to be unable, to pay their debts, must have regard to the interests of creditors.

There are various ways to wind up or liquidate a limited liability company. Each method will essentially realise the assets of the company and distribute the proceeds to the company’s creditors or shareholders, but they are individually unique as to the processes that need to be followed.

One such method is a Members’ Voluntary Liquidation.

What is a Members’ Voluntary Liquidation?

As regular readers of our blogs will know, a group claims procedure came into force in Scotland on 31 July 2020.