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Administration or liquidation for Company or LLP Law firms – Plan C

1st March, 2023
Keith Steven

Written ByKeith Steven

Managing Director

07879 555349

Keith is the author of the content on this comprehensive rescue, turnaround and insolvency website. He is the managing director of KSA Group Ltd - a specialist firm of turnaround and licensed insolvency practitioners. Keith was nominated for Turnaround Practitioner of the Year 2014 at the National Insolvency and Rescue Awards in 2014.

Keith Steven
  • Plan C: Pre-pack Administration to sell the business or Voluntary Liquidation
  • Pre pack of the business
  • Trading Administration
  • Voluntary liquidation
  • Creditors Petition

We are a firm of very worried solicitors. Our legal practice is a company or LLP. We are under growing pressure from all sides. We don’t think the company can survive but the business may or may not be viable. How can you help us solve these problems?

There are three options to deal with severe cashflow problems, this page looks at:

Plan C: Pre-pack Administration to sell the business or Voluntary Liquidation

Please look at Plan A and Plan B guides if the business is viable and just needs time to restructure.

If the debts are very large, your business is no longer viable no matter what steps you take to revive it, then the sensible answer to stop the terrible pressure you face, is either sell the practices business assets through a pre-pack administration, trading administration or wind it up.

Pre pack of the business:

If there is a viable business but there are threats from creditors to wind up the company up, then it may be possible to package the business up for sale. SRA advice would have to be taken and the plans well developed before so doing.

Perhaps you already have an interested party who may acquire the business but not the company or its liabilities. If not it may be worth setting out the plans for the pre-pack approach, which KSA group can assist with. Then we would market the business for sale before the administration process. Again prior to the application for the administration, discussions must be held with the SRA.

See a general guide here to pre-pack administration . See a guide to trading administration here

Suffice to say that administration is a public domain event and one that may lead to a risk of personal bankruptcy for the partners, if personal guarantees have been provided to the bank for example.

Under Insolvency Practitioners guidelines (known as SIPS) the IP must market the business. Often this requires sending sales memos to a database of potential buyers, or the IP may place an advert on his website and/or a local or national newspaper. If he gets no interest or no indication of interest he can then sell to the newco or third party.

He or she will also have to get formal valuations of the assets, intellectual property and or goodwill of the insolvent company by RICS qualified surveyors. Generally any offer needs to be commensurate with such valuations. This is required under SIP 16 which is designed to appease creditors that there is no aim to stitch up creditors and simply pass the business over to the same directors or designated members directors in newco

At this stage if you and your colleagues are planning to buy the business you must be careful with regards to your personal position. As directors of the dying company, you have a fiduciary duty of care to the creditors. Of course the end of that business could lead to personal liability.

Starting “newco” can put you at risk of conflict of interest. It’s likely that you will need separate legal advice on both businesses. Best to talk to lawyers with insolvency and pre-pack experience. Contact Keith Steven for a list of good lawyers.

The IP will take advice from his lawyers as to compliance and risk. He may require this advice to be paid for along with his disbursements.


SRA must be involved. The plan needs to be set out and broadly agreed before petitioning the court for the administration order.


Will your client’s contracts or BANK allow you to pre-pack? (The current stand point of several clearing banks is no they won’t support pre packing to the incumbent partners/ directors/ shareholders).

Will your landlord(s) allow a new partnership or company to occupy their property? Are your suppliers prepared to supply a newco? Will your creditors be angry about this approach? careful consideration must be given to all of these issues and a plan developed. Again SAK can advise you on this.

Talk to Keith Steven now on how pre-pack may be an option. 07974 086779. We can often find a way to take out the bank debt and replace with a friendly financier who will allow the pre-pack to proceed.

Trading Administration

It is theoretically possible for the business to enter into administration and for the administrator to trade on whilst looking for a buyer. The SRA would always require a solicitor insolvency practitioner to act in this case. The administrator would at the least need an assurance from SRA that it would not intervene post his appointment.

Trading in administration is often risky for the office holder and more often than not he would wish to sell as soon as possible, thus pre-pack is the more likely option.

Voluntary liquidation

Where the directors have decided that the company has no viable future or purpose then a decision may be made to cease trading and wind up the company. Clearly such a decision should not be taken lightly and we would recommend that all other options are carefully considered and compared to the objectives of the directors. Before the process starts it is vital to speak to the SRA and get it involved.

There are two basic ways that the company or LLP can be wound up: the creditors petition and a debtors petition

Creditors Petition

A creditor can petition to wind up the company if debts of more than £750 are outstanding. This leads to compulsory liquidation by the court. SRA will probably intervene if a winding up petition is advertised and there is no plan to protect the clients.

The liquidation process for in depth reading see our experts guide to creditors voluntary liquidation here

Once appointed the tasks of the liquidator are to

  1. Realise the assets in the company including any overdrawn directors loan accounts. All debtors, property and other assets will be collected by the liquidator.
  2. Investigate the conduct of the directors and officers of the company.
  3. The liquidator must also ascertain whether any transactions have taken place that put the creditors (individually or collectively) into a better position than they should be then such transactions (known as preferences or transactions at undervalue). If such transactions have been completed before the winding up, they can be un-done. (Antecedent transactions).
  4. The liquidator agrees the claims of creditors and eventually completes his /her work by making payments (called distributions) to the creditors in order of priority (if any distributions can be made).

Common sense dictates that allowing creditors to initiate such liquidation proceedings indicates to creditors and the liquidator that the directors have failed to act in the best interests of the body of creditors as a whole.

Many people in companies are told by accountants or advisors to just cease trading and “let someone wind the thing up”. In our opinion this is very poor advice especially for a law firm with client responsibilities. We always recommend taking decisions to ACT.

As a law firm the SRA will almost certainly intervene in the process and remove the clients files and seize the trust accounts. It is vital to discuss the plans to liquidate the company with the SRA at the earliest opportunity.

Before deciding to liquidate please review all the contents of this site and take advice from either an insolvency/turnaround practitioner in your area or call us on 08009700539. Or email us with your basic details and we will call you back at an agreed time and in confidence.

What now? If your business has cashflow problems you must act or the creditors will, sooner or later act aggressively against you.

Want to know more about liquidation? KSA Expert Guide to Voluntary Liquidation

However, in advance of any meeting and issuance of engagement  letters our regulators and the Insolvency Service (part of HM Department of Business Energy and Industrial Strategy) require all insolvency practitioners to obtain know your client (KYC) and anti-money laundering (AML) identification documents for all directors and shareholders holding >25% of the shares to allow us to proceed to advise the company. We will require up to date ID information including a photographic ID, such as a passport or driving licence PLUS a home utility bill or bank statement for each person.

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
Man with umbrella

What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

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