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Company insolvency in Scotland

2nd March, 2022

Written ByDerek Robinson

Tunaround & Insolvency Manager (NORTH)


0771 476 5578

Derek joined KSA Group in November 2011 to help us expand our services throughout Scotland and Northern Ireland. He has a great deal of business experience developed throughout his career, beginning in advertising, marketing and marketing services and latterly founding and growing businesses in printing, graphic design and on-line toy retailing.

Derek Robinson

Is there a genuine company rescue culture in Scotland?

There is only one company driving the rescue culture in Scotland, and you have found it!

I am Keith Steven. Our firm KSA Group, who run this website, are responsible for a significant proportion of CVA led rescue work in Scotland.

If you run an insolvent or struggling Scottish company the chance of rescue is low. Amazingly, less than 1% of insolvent companies are rescued by a company voluntary arrangement or CVA each year!  This is compared to England and Wales, where proportionally, the CVA is used 4 times as often.

Here are statistics from the 2020 – 2021  that show the “rescue culture” still has a long way to go.

Table below shows corporate insolvencies by type between 2020-21 Q1 and 2021-22 Q3. Corporate insolvencies include receiverships appointments, compulsory liquidations and creditors’ voluntary liquidations. In the past, the majority of corporate insolvencies used to be compulsory liquidation. However, since 2020-21 Q1, the majority are creditors’ voluntary liquidations. Creditors’ voluntary liquidations increased by 114.8% between 2020-21 Q3 and 2021-22 Q3. Compulsory liquidations increased by 6.4% over the same period.

 

So always ask your advisors these questions – What about a CVA – would that work? What is the comparison between CVA and liquidation? What is the comparison between CVA and administration?

  • So always ask your advisors these questions – What about a CVA – would that work?
  • What is the comparison between CVA and liquidation?
  • What is the comparison between CVA and administration?

Please explain why you have chosen one particular solution whilst not considering the others.

There are many myths and misconceptions about CVAs. So if you have been told they don’t work then read our worries and mistruths page here to see if this is the case. We have done over 600 CVAs so we are speaking from experience and we know what we are talking about.

The standard approach in Scotland seems to be – if a company is struggling, whack in a winding-up petition and knock the company over or place it into liquidation yourself.

Almost all insolvency practitioners in Scotland will tell you that HMRC WON’T SUPPORT A CVA!

Interestingly, HMRC in Scotland are very supportive of rescues, and would much rather see the company survive in CVA than be liquidated and start again. We have never had a CVA rejected by HMRC in Scotland. We have a good working relationship with HMRC in Scotland and with the Voluntary Arrangement Service in England who are currently dealing with all Scottish CVAs.

Whether you are dealing with a CVA (company voluntary arrangement), creditors voluntary liquidation, Phoenix, administration or pre-pack administration sale we can help you find the RIGHT SOLUTION!

If your business is unsalvageable, then there is still the option to liquidate – we can help assist with this. Call us on 08009700539 or 0131 242 0081. We have fully trained advisors ready to talk to you between 8 am and 6 pm every weekday.

Our regional manager for Scotland and Northern Ireland, Derek Robinson, will be able to visit you at short notice and go through all the options. Please call our Edinburgh number on 0131 242 0081.

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 help@ksagroup.co.uk 

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