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.
What are the downsides?
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:
- Detailed DAILY CASHFLOW we can provide the tools and assess this for you. But this MUST be introduced to help survival. You or your admin people must update this every day.
- Statement of affairs for the business and your own assets. Probably requires a desk top valuation of any property. KSA will do this confidentially as part of the brief.
- Detailed financial forecasts for the business. What if scenario planning ie what if fee income falls, WIP is not all collected for example?
- Assessment of your personal property and assess possibility of new debt from property(ies)
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 KSAGroup'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
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