An Insolvency Practitioner Is A Must For Companies Going Into Liquidation

When the financial affairs of a company are in trouble, and no relief is in sight, companies can act to go into liquidation. This process allows its unpledged assets to be sold so that it can create cash that can then be used to pay its creditors who have no lien on any of the company’s assets. Secured creditors who have any assets pledged to them can then take them over after obtaining foreclosure orders. The remaining amounts after meeting the dues to all creditors can then be distributed to the shareholders as per their holdings.

Liquidation processes can be initiated by shareholders as voluntary liquidation or may be forced on the company by the action of creditors who require court orders for doing so, in a process called compulsory liquidation. Businesses cannot go into liquidation unless they use the services of an insolvency practitioner. These are qualified professionals who are recognized by professional bodies and must be authorized by them. Companies that are into insolvency practice need to be licensed to carry out this work. These practitioners are lawyers or accountants who have gone through extra training and passed examinations to prove their competency.

Jamie Playford, director and a licensed insolvency practitioner at Leading UK in Norwich shares that, when a company goes into voluntary liquidation, it will appoint an insolvency practitioner who will go through the process of winding up all the affairs of the enterprise. At times companies designate these practitioners provisionally, even before the actual process of liquidation is started. This appointment allows them to understand the full implications of the settlement before a final decision is taken to initiate the process. When a company is forced into compulsory liquidation, it is usually a result of court cases against them and in such situations, the liquidator is appointed by the tribunal.

The appointed insolvency liquidators will assume charge of all the assets of a company and ensure that its creditors are paid off first. These liquidators will conduct a complete investigation into the affairs of the company in case of voluntary liquidation, to ensure that the liquidation is not a result of any malpractice. They have to ensure that the company’s confidentiality is protected. Once liquidation processes are started, court action by creditors automatically ceases.

At times, courts may require a company to go into administration to solve its problems and see if the payment to creditors can be made by the corporation while it is functioning. During this period, which never lasts more than a year, legal action by creditors is halted, while the company attempts to restructure its finance or arranges to sell it. Businesses can also opt for a voluntary arrangement with creditors in which they accept lesser sums for the amounts due to them. In the case of liquidation, there is no guarantee that creditors will receive their full payment, and they may have to forgo substantial sums. This arrangement has to be approved by courts and all legal action by creditors has to cease.  Insolvency practitioners are the best persons to advise on the route a company must take to tide over or overcome its financial problems.

Update: In April last year, Eastern Daily Press reported about Woocoo Limited – a company which offered health foods, to be placed into liquidation. During that time, Jamie Playford in Norwich looked after the company’s affairs and assisted the shareholders and directors to place the company into liquidation. All queries that were related to Woocoo Limited were directed to Mr. Playford.