Insolvency as a job – It can be a thankless task.

Everyone wants a pop at someone and that someone ends up being us at times. 

  • Landlords losing a tenant or with rent arrears
  • Creditors being owed money
  • Director/shareholder disputes
  • Employees losing their jobs

We’ve had creditors turn up with big burly men and threatening behaviour, verbal and written insults. Every man and his dog thinks that because a company has gone bust there must have been some wrong-doing which we absolutely must investigate. Albeit that is very rarely the case, in the few instances we do have to take legal action and lift the corporate veil, we then hear ‘you didn’t tell us that’ or something else, quite often insulting the person having given the advice. 

If we know about it, we will tell you if it’s right or wrong.  Even if there is an action, we report it to the Insolvency Service, but it rarely results in director disqualification.  We can only pursue someone financially if they have anything to pursue and if it’s cost effective.  However, if we don’t do so, that’s our fault too, even though we are an independent 3rd party who was not involved whatsoever in running that business.   Often, we are accused of being in cahoots with the directors, just because they came to us for advice and we are helping them with their statutory duties, along with relieving them of some pressure at the same time. 

We work in a very complex profession whereby the ‘entity’ we are acting for changes throughout, initially advising directors or individuals of their responsibilities and guiding them through the process before being formally appointed and then having a statutory duty to act for the creditors.  Despite all of these,  we remain in insolvency because we believe there is a value in what we do. 

The insolvency process is beneficial although it’s a hard sell at a networking event, we can’t often offer much in return but may help you keep a client, ensure employees get paid, release directors from a lease enabling the premises be let to a more reliable business, put some money back into the public purse, return funds to unsecured creditors in quite a few occasions, relieve some pressure from business owners that simply need guidance so they don’t fall fowl and become one of those few above that do become personally liable. 

We often provide enough support that our formal services are not needed.

Who knows – you may actually see the positives in what we can offer….. 

By Claire Goodacre 

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Have you given a personal guarantee?

Have you given a personal guarantee

Perhaps an obvious question but, how many times do directors respond with something like, “I am not sure,” or “No, I do not think so.”  Alternatively, a director will say they have given a personal guarantee, only to discover all they have done is signed a credit agreement as director on behalf of the company.

When a company enters an insolvency event, whether that is a restructuring procedure or liquidation, a company creditor who holds an enforceable personal guarantee may ignore the insolvency process and pursue the guarantor.  This could result in the personal insolvency of the guarantor, which in turn, has an adverse impact on the company where a restructure or turnaround scenario is intended.  In a recent instruction, 80% of the company liability was subject to personal guarantees, resulting in the director having to consider his personal position in addition to the possible restructuring of the company.

Sometimes personal guarantees are a requirement for company borrowings or certain supplies contracts.  Every director should be afforded the right to obtain independent legal advice before signing a personal guarantee and should take that advice.  If possible, you should also ensure there is a cap on any potential exposure you could face.  You may even consider insurance in case the guarantee crystallises.

Apart from the obvious financial burden on a guarantor, personal guarantees may lead to directors acting in breach of their duties.  As a company begins to struggle, it will be a natural instinct to pay that creditor in preference to others or, in some cases, avoid the guarantee liability from crystallising by continuing to trade when, perhaps, you should have ceased trading.  This self-protection mindset may conflict with your duties under the Companies Act and expose a director to potential compensatory awards for malpractice.

At PBC we always consider “The person behind the limited company” and will discuss options where a personal guarantee could have an impact on the way forward.  In our opinion, unless the guarantee can be managed, you have a director whose train of thought is not necessarily focussed on their statutory duties.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.