Often Insolvency Practitioners encounter a situation in a shareholder(s) appointment of a liquidator, where it becomes apparent that the liquidation has been manufactured after the director(s)/shareholder(s) have structured the affairs of the company in such a way that assets are often taken over at undervalue by another company controlled by the same director(s)/shareholder(s) leaving various liabilities behind which always include Inland Revenue who will have a large amount outstanding.
The director(s)/shareholder(s) will either have consulted with a specialist insolvency lawyer or with a self-styled insolvency “expert”. A sale & purchase agreement is drafted, often backdated to at least a year prior to liquidation to avoid being caught by the Phoenix provisions of the Companies Act. The Licensed Insolvency Practitioner comes in “cold” after being appointed and tries to make sense of the situation.
The game begins. The Insolvency Practitioner is not yet aware of the “rules” but is catching on fast. The lawyer/advisor tries to explain the situation. The director(s) are interviewed but say as little as possible. Investigations commence. Bank statements and accounting software (usually not up to date & unreconciled) are analysed and the business assets which have been hived off the need to be revalued. This often results in a large claim against the director(s)/shareholder(s) and the new company that they set up. This, at least from a Waterstone perspective, can culminate in bankruptcies of those involved and/or liquidation of the new entity unless a satisfactory settlement can be entered into.
In the era of Licensed Insolvency Practitioners, the days of a patsy liquidator willing to turn a blind eye are numbered. This hasn’t yet stopped director(s)/shareholder(s) from trying to stitch up a situation where the company is run to the ground and they then bail with the assets leaving creditors behind. They should realise by now that the game has changed.
What should be considered is that if they wish the affairs of a company to be properly structured prior to an inevitable liquidation, the appropriate people to consult are licenced insolvency practitioners. The insolvency practitioner will ensure that the business assets are fairly valued before any sale & purchase agreement is entered into and that creditors are treated equally in the process according to their respective secured, preferential and unsecured positions.
But alas, not many have yet cottoned on to the fact that the rules of the game are not what they sometimes or often, in the days of unscrupulous liquidators (who would now not qualify for a licence), used to be.
Waterstone specialises in insolvency and recovery appointments. Our experienced licensed insolvency practitioners can help you with your company’s liquidation process. Please get in touch with us at 0800 CLOSED or [email protected].
Alternatively, we offer a free 30 min Initial consultation. Book an appointment with our team today!