Importance of advice when avoiding insolvency
It's a good idea to take financial and legal advice as soon as your business starts getting into trouble. This will give you time to assess the alternatives open to the business.
You should seek professional advice immediately if:
- you cannot cover your debts
- the business receives a County Court summons
- you can't pay staff wages
- there is an acute lack of working capital
Your accountant, who may already be familiar with your business, may be able to advise you.
You can also find an insolvency practitioner through the Insolvency Service website - Opens in a new window. Alternatively, find an insolvency practitioner through the R3 website - Opens in a new window.
Insolvency practitioners are bound by a code of practice based on five principles of integrity, objectivity, competence and due care, confidentiality and professional behaviour which ensures that they carry out their work to high ethical standards.
Directors should seek legal advice if their company becomes insolvent. You can find a solicitor at the Law Society website - Opens in a new window. Directors are required to make an early decision on whether the company should cease to trade. If you are the director of a company facing financial difficulty, you will need to be sure that the company has reasonable prospects of avoiding liquidation, before taking the decision to continue trading.
Directors need to be aware of their position regarding the business' situation as they may be found:
- personally liable as a result of any personal guarantees
- criminally and personally liable for fraudulent trading, ie deceiving creditors, if the company goes into liquidation
- personally liable for wrongful trading, ie trading while the company is insolvent, if the company goes into liquidation
Directors may be disqualified if they are found liable and could face criminal proceedings.
Subjects covered in this guide
Insolvency Service Enquiry Line
0845 602 9848
Citizens Advice Bureau
020 7833 2181
UK Insolvency Helpline
0800 074 6918