Small businesses that find themselves in need of an insolvency practitioner will generally be going through difficult times.
It’s natural to be concerned about how you can go about getting the right kind of help in these scenarios, especially when the implications are so serious. If you’re going through financially challenging times, then here’s what you need to know about insolvency practitioners and the role they’ll play in helping you out.
What is an insolvency practitioner?
Insolvency practitioners, or IPs, are licensed professionals from providers such as Chamberlain & Co who are trained to help businesses through a range of different insolvency processes. They are able to provide specialised, expert advice and guidance, often acting as mediators between a wide range of different parties.
Regulations that cover insolvency practitioners
Insolvency practitioners are subject to strict regulations. They must be members of a recognised professional body, the two main options being the Institute of Chartered Accountants in England and Wales (ICAEW) and the Insolvency Practitioners Association (IPA). All IPs will also need to pass the Joint Insolvency Examination, to ensure that they’re able to operate at the highest of professional standards.
When might a small business need an insolvency practitioner?
As the name suggests, small businesses will typically need help from an insolvency practitioner when they are insolvent. Insolvency refers to a state of economic ill health where a business is unable to pay its debts, and those debts are getting bigger and bigger. An insolvency practitioner will be able to choose between a range of different potential options, from administration to liquidation. As such, obtaining Insolvency Advice is an important step in ensuring that a small business can recover, or at least survive, in the coming weeks and months.
While it’s tempting to try to weather the storm without getting help, seeking assistance from an insolvency practitioner earlier rather than later can often help small businesses limit the damage that’s done to their business. This may mean that the business is able to avoid liquidation, and find some way out of insolvency
What will the insolvency practitioner do?
Exactly what the insolvency practitioner will choose to do with regard to your situation will depend on how severe the situation is. If they decide that it’s necessary to liquidate the business, then they will start to sell off the assets, to raise as much cash as possible. The insolvency practitioner will then start to pay back the creditors, in legal order of priority, with the cash that they managed to raise.
In certain situations, liquidation may not be necessary. In these cases, the insolvency practitioner will ensure that certain measures are put in place that increase the probability of financial health in the business in question, to maximise the chances that they can fully pay their debts in the future.
This should have provided a little more clarity on the kind of assistance that insolvency practitioners can provide small businesses going through financial hardship.
It’s important that you seek their advice sooner rather than later, as this will significantly improve your chances of achieving a favourable resolution to your situation. It’s crucial that you do your research thoroughly, and get help from an insolvency practitioner with plenty of experience helping businesses through similar difficulties to those that you’re currently facing.
