Written ByKeith Steven
Managing Director
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.
I am a worried solicitor practising as a sole trader; What options do I have for restructuring?
Plan B for lawyers – sole trader rescue
There are three options to deal with severe cashflow problems, this page looks at Plan B Individual Voluntary Arrangement with creditors.
An IVA could be the answer to your problems and could protect you from your creditors. But it is a risky approach and very damaging to your credit rating. It is a powerful insolvency tool that will ringfence your creditors (that’s all your business and personal debts but not a secured mortgage) and take away the pressure.
It is a deal between the insolvent sole trader and his or her business and personal creditors; this legally binding contract allows you to repay some or all of the historic debts from future profits over a period of time. Debtors (you) stay in control and it stops any legal actions if you use a quality advisor. It has been in UK law since 1986 and is one of the Government’s preferred rescue options.
IVAs are powerful for rescuing a distressed business when you know it can be profitable in future. You can make employees redundant with no cash cost, get out of property leases and problem contracts and make the practice profitable again with the IVA and our help!
In the time it takes us to organise the IVA for you, we will freeze your payments to VAT, PAYE and creditors. Then together we offer the creditors a deal over time to pay something back from future surplus cash. This improves the cashflow in your business.
We are often asked If its so great why doesn’t everyone use the IVA if their business gets into trouble? The answer is because very few people know about this tool and most sole traders with problems end up going bankrupt because they are scared of insolvency.
Useful Guides to IVA:
Individual Voluntary Arrangement Detailed Guide – all you need to know about IVAs from framing the deal through to creditors’ votes.
Individual Voluntary Arrangement FAQs frequently asked questions from our users. Read these and see if your question is answered.
Individual Voluntary Arrangement Flowchart a fast and unique pictorial view of the process of IVA.
A fee is payable and your credit rating will be affected for up to 6 years after the IVA. You may have to give your share of the equity in your home to the creditors as part of the deal. All of this is much better than bankruptcy by the way!
KSA will always however make sure that the other options have been assessed, a statement of affairs prepared and valuations of properties obtained to counter the why wait for money what if we make the chap bankrupt? questions. The motto is we are prepared for their aggressive questioning.
If you have a lot of property equity personally and the practice closes then be prepared as HMRC in particular go after that. Like most people though you probably have little liquidity, having not drawn much recently from the practice, equity is tied up and your spouse is entitled to half anyway. So pointing this out bluntly allows us to prepare a plan for the IVA to return a dividend on the creditors debts over a considerable period of time.
We would always insist on the following work being part of our restructuring brief:
This process can be delivered in 2-4 weeks from engagement and is led by very pragmatic experts in this field. Before commencing we will set out the strategy plan in writing. This work is always costed in writing in our unique solutions report which is provided FREE after your first meeting with a KSA Director or Regional Manager.
Our fees usually come from cashflow savings that we can create for you as part of this process.
What now? If your business has cashflow problems you must act or the creditors will, sooner or later act aggressively against you.
Call KSA Group’s DEDICATED LAWYERS LINE now 0845 5194930
What if neither Plan A or Plan B is suitable?
Plan A is to propose an informal time to pay deal
Plan C bankruptcy, where the practice closes and you go personally bankrupt.
Of course acquisition by another firm is a possibility too. Will this acquiror pick up all of the liabilities of your firm?
Call KSA Group’s DEDICATED LAWYERS LINE now 0845 5194930
What is a CVA? | Company Voluntary Arrangements Explained
A CVA or Company Voluntary Arrangement is a legally binding agreement with your company's creditors which allows a proportion of its debts to be paid back over time. 75% of the creditors, by value, who voted need to support the proposal.
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Pre Pack Administration Process and Procedures
Pre pack administration is an insolvency procedure which allows an insolvent company to sell its assets to a buyer before appointing administrators. It’s a powerful, legal way of selling the business on to a trade buyer or third party.
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Worried Director What Will Happen To Me After Liquidation?
"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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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.
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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.
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