FAQs
Insolvency, commercial finance and debt recovery are complex topics and attract lots of questions.
To help you get the answers you want, here are some of the questions we get asked most frequently.
General
Yes. We offer a free no obligation meeting to discuss you or your client’s circumstances and how we can help you. Call 020 8662 6070 or email us at advice@babr.co.uk to find out more.
More information on any of these subjects can be found on the individual pages of the Bailey Ahmad Business Recovery website.
We would advise that if you find yourselves in any kind of financial trouble then to either give us a call us on 020 8662 6070 or email us at advice@babr.co.uk to arrange a free no obligation to continue discussion with our team on how we could be able to help you and your company.
We understand the immense pressure faced by business leaders when making critical decisions, managing cash flow, and dealing with debtors and creditors. We know first-hand the struggles of developing growth plans and the overwhelming stress that comes with it, but you don’t have to face it alone.
Our team is dedicated to supporting you every step of the way. We genuinely empathise with your concerns and are ready to shoulder your burdens. Count on us to listen attentively, offer guidance, and provide the assistance you need. You can trust us to be there for you when it matters most.
No matter how challenging or sensitive your situation may be, we always strive to balance your needs with professional expertise and focus on achieving the best outcome for you.
Our goal is to provide you with comfort and reassurance throughout the entire business recovery and insolvency process. We are committed to delivering commercial solutions that meet your unique circumstances and help you navigate this difficult time with confidence.
Whatever you do, whoever you are, you will receive exceptional service – we are with you, every step of the way. We give you space to consider your options, remind you of the choices available and work collaboratively with you. Our ultimate aim is to arrive at the best possible outcome for you, your family, your employees, suppliers and customers.
Simply choose a date and time that works for you. It’s up to you if you’d like to meet or chat remotely with a qualified insolvency practitioner.
We’ll have a conversation about your current financial situation, where you are with your business, the broad challenges, current financial position and trading forecasts.
You’ll get a no obligation competitive quote that outlines your options and recommends the best solution for you and your company.
Insolvency
You become insolvent when you can either no longer pay your debts as they fall due, or when your total assets fall below the worth of your total liabilities. A company can fall insolvent even while profitable, this may be because of a shortage of cash, like when customers can not settle debts to a company or if the company invests at the wrong time. Any of these issues may mean that the company is unable to repay debts as they fall due, even though the business is otherwise healthy. If you notice any of these issues, then it is imperative to seek proper advice from an insolvency professional at the first sign of warning that the business may be insolvent.
If you believe that your company is insolvent, then it is essential that you take action to minimise the loss of creditors to your company. Your first duty should be to seek advice from a licensed insolvency practitioner to ensure that your company falls into further financial issues. It could be that the company’s cash-flow issues are manageable in the long term and if this is the case then you may be able to arrange additional financing or come to an agreement with creditors with revised terms of payment.
Firstly, as insolvency practitioners, we offer an initial consultation free of charge. Whilst there may not be a great amount of funds within the company, the guidance of an insolvency practitioner could end up preventing creditors taking legal action against the company and bringing further financial difficulty, meaning the costs of paying for professional assistance could be relatively small in comparison.
Even since the introduction of the Insolvency Act 1986, anyone that undertakes the duties of a liquidator, administrator, administrative receiver, supervisor or trustee must be qualified as an insolvency practitioner.
A partnership voluntary arrangement (PVA) is a legal agreement between a partnership and its creditors to repay their debts, usually through an agreed affordable monthly payment over a five-year period. The amount agreed to must be reasonable and usually results in a percentage of the debt being repaid and the remaining balance being written off. For an PVA to come into effect, at least 75% of creditors who vote on it must agree to its terms.
A CVA is a solution for companies grabbling with debt repayment challenges.
It entails a formal agreement between a limited company and its unsecured creditors to settle some or all of the debts within an agreed timeframe. If creditors consent, the company can continue operating.
A member’s voluntary liquidation (MVL) is often referred to as a solvent liquidation as it is used to liquidate a company that still has a surplus of assets. This process is often preferred when directors or shareholders have decided to bring the company’s life to an end and extract the remaining assets in the most tax efficient way. The tax rate payable on the remaining assets will only be 10% if entrepreneurs’ relief is available.
A creditors voluntary liquidation (CVL) is an insolvency process which sees an insolvent company placed into liquidation, bringing its life to an end. A CVL is an out of court procedure which sees the use of a private sector insolvency practitioner rather than the courts and the insolvency service. It tends to be a quicker and more cost-effective way of placing a company into liquidation. A CVL can also be used to create a phoenix company, which can see assets increased, jobs saved and an increase in the return that creditors can expect to receive.
Company Voluntary Arrangement (CVA)
A CVA works well for companies that are viable moving forward but are burdened with debt. It offers companies the chance to repay its creditors over time. CVAs are a very flexible tool and may also involve the sale of excess assets, refinancing or the introduction of external investment to contribute to repaying a company’s creditors.
A general rule of thumb is that a CVA should offer creditors a better alternative to what would be the case should the company be forced to enter into another insolvency procedure such as liquidation.
The length of a CVA will vary based on what a company can offer its creditors; sometimes lasting a very short period but can run for up to five years.
The advantages include (but are not limited to) the following:
- Directors remain in day to day control of operations
- A company and its business can continue to trade throughout the CVA
- It can improve cash flow quickly as payments are structured to be manageable and affordable, also offering peace of mind in the long term
- It can stop pressure from HMRC
- It can stop the threat of a winding-up petition being presented by a creditor
- There is no specific requirement for assets to be bought back by a successor company as is often the case with administration and liquidation sales. This can be particularly helpful where prospective purchasers have limited funding available
- Personal guarantees offered by directors may be deferred or reduced in certain circumstances
- Staff redundancy costs can be included in a CVA avoiding an initial cash flow hit to a company’s business. The employees affected may be entitled to make a claim from the government’s Redundancy Payments Service in respect of all or part of their redundancy entitlements when a company cannot afford to pay them
- A CVA carries less stigma than other insolvency processes such as liquidation or administration
- Any outstanding unsecured debts will be written off at the end of the CVA
- A CVA can adapt if circumstances change
As licenced insolvency practitioners we advise, implement and oversee a CVA of a company.
In doing so, we have three distinct roles:
Advisor
First, we act as an advisor to a company to help them structure a CVA proposal to put forward to their creditors. This may involve advising on practical restructuring strategies to return a company to profitability, discussions with key parties affected, and general support for directors and their other advisors in decision making in the period leading to the implementation of a CVA.
Nominee
Second, we act as a Nominee whereby we confirm that the CVA is fit and fair to all those affected, is feasible (i.e. has a good chance of succeeding) and therefore should be put to creditors for their consideration.
Unsecured creditors can then vote on whether to accept the CVA proposal. This is coordinated through a virtual meeting during which creditors can ask questions and may suggest variations to the proposed CVA. If over 75% (measured in value of their claim) of those who vote accept the CVA proposal, then the CVA commences and is binding on all unsecured creditors.
Supervisor
Once a CVA commences, our role changes to that of a supervisor of the CVA. As a supervisor, we ensure that a company sees through its CVA commitments, as well as manage the process of repaying those unsecured creditors from money paid into the CVA by the company.
We can also coordinate adjustment to the terms of a CVA if circumstances change for a company, with the consent of creditors.
How do I find out about placing my company into liquidation?
The short answer is to give us a call on 020 8662 6070 or email us at advice@babr.co.uk. By doing this we can provide an assessment regarding your company or personal circumstances. You can also find that our website provides a basic outline of the process that you as a director, sole trader or individual will typically undergo of placing a company into Liquidation.
What is a Company Voluntary Arrangement or CVA?
A company voluntary arrangement (CVA) is a legal agreement between a company and its creditors to repay their debts, usually through an agreed affordable monthly payment over a five-year period. The amount agreed to must be reasonable and usually results in a percentage of the debt being repaid and the remaining balance being written off. For an CVA to come into effect, at least 75% of creditors who vote on it must agree to its terms.
Creditors’ Voluntary Liquidation (CVL)
A liquidation is the process of bringing the life of a company to an end. Liquidation can either be done voluntarily, through a private sector insolvency practitioner or through the courts. A creditors voluntary liquidation is an out of court procedure, making it a much quicker process then a compulsory liquidation which would go through the courts. A creditors voluntary liquidation can also be used to organise a phoenix company.
Placing a company into liquidation is a quick and easy process. For a company to be entered into liquidation ‘Notices’ need to be prepared to convene a decision procedure of creditors. The Notices consist of approximately six documents and get sent out to both creditors and shareholders. The decision procedure often occurs within two weeks of the date notices being signed. The shareholders who have placed the company into liquidation would then nominate a liquidator. The appointment can either be ratified by creditors or they may decide to nominate their own choice of liquidator if not happy with the original choice. The whole process of a company entering liquidation can often happen within two weeks of a company being instructed to do so.
A creditors voluntary liquidation (CVL) is an insolvency process which sees an insolvent company placed into liquidation, bringing its life to an end. A CVL is an out of court procedure which sees the use of a private sector insolvency practitioner rather than the courts and the insolvency service. It tends to be a quicker and more cost-effective way of placing a company into liquidation. A CVL can also be used to create a phoenix company, which can see assets increased, jobs saved and an increase in the return that creditors can expect to receive.
To place a company into CVL can take as little as 7 to 14 days.
Once a company is in CVL and we take control as liquidators, a typical CVL is concluded within 7 months to a year. However, if required a CVL will continue as long as is necessary, for example where more time is needed to recover a company asset on behalf of creditors.
From the very moment we are appointed liquidators of a company, we take charge, leaving directors free to rebuild and restart.
In the short period leading to liquidation, directors remain responsible for the affairs of the company. However, we will provide support and guidance for all the practical decisions and steps that will need to be taken in the lead up to liquidation, for example:
How best to cease trading
Staff communication and managing redundancies
Securing/safeguarding assets
Communicating with HMRC and other creditors
Dealing with customers
Practicalities of placing a company into CVL
Once a company enters CVL, we are appointed liquidators of the company. As liquidators take full control and responsibility for a company’s affairs and although the directors remain in office, their powers cease. The directors only requirement is to assist the liquidators in carrying out their role. That generally involves an initial handover of key information about the company at the outset, and being available to answer ad-hoc questions from time to time that may arise during the course of the CVL.
In the meantime, the directors are free to move on with their lives and re-start, whether that be building a new successor business or seeking employment.
In short, yes. It is a common misconception that if you are a director of a company that fails and enters liquidation or administration, you cannot be a director in the future, but this is not the case.
When a company is placed into administration or liquidation, there is an independent review of the company’s records and the decisions and actions of those who were directors in the last three years. From our experience, in the vast majority of cases directors act in good faith, seek help when they need it and generally act reasonably. If a mistake is made, and if reasonable steps were taken to recover the position, either at the time or even following insolvency, it is very unlikely that those involved will be barred from being a director in the future.
It is only in more extreme cases where directors fail to act, put their own interests ahead of others, or where there is persistently bad behavior, that they face being disqualified from acting as directors in the future.
Wrongful trading is trading whilst insolvent or whilst you ought to have known you were insolvent. Insolvent means unable to pay your debts as they fall due.
If wrongful trading results in a greater loss to creditors overall than had the directors acted sooner and taken professional advice from an insolvency practitioner, they may be required to personally contribute to the company in CVL to restore the position to what it would have otherwise been had they not continued to trade longer than they should have.
If wrongful trading takes place, this may also result from a director being disqualified from being a director again the future.
All company debts are dealt with by the liquidator. Assuming there are sufficient asset recoveries to pay creditors, the liquidators will review and agree to claims to ensure they are valid and then make a payment to creditors according to their class and priority.
I have personally guaranteed a company debt – what does that mean for me?
Essentially where someone has provided a personal guarantee for company debt, assuming that it was properly entered into with the full knowledge and understanding of the guarantor, then they will have to settle any shortfall that the company in CVL cannot meet.
We can give guidance on how best to approach personal guarantees when they arise, subject to the specific circumstances.
Creditors’ Voluntary Liquidation (CVL) – find out more here (babr.co.uk)
‘Pre-pack’ insolvency sales refer to a situation where a sale of an insolvent company’s business and assets is negotiated to the company entering administration or liquidation. Once in administration or liquidation, the sale is completed by us as the appointed insolvency practitioners acting as either administrator or liquidator.
Key characteristics of pre-pack sales are:
- Assets are subject to independent valuation and (as far as possible) marketed to achieve best value for the company’s creditors
- We oversee sale negotiations to ensure that any completed sale is fair to all stakeholders
- We can and do sell assets to connected parties such as employees or directors if it represents the best outcome in the circumstances
- Any sale is subject to full disclosure to the company’s shareholders and creditors
- The sale is completed by us as independent insolvency practitioners acting as administrator or liquidator. This gives all parties comfort that the sale is unlikely to be challenged at a later date
Members’ Voluntary Liquidation (MVL)
A member’s voluntary liquidation (MVL) is often referred to as a solvent liquidation as it is used to liquidate a company that still has a surplus of assets. This process is often preferred when directors or shareholders have decided to bring the company’s life to an end and extract the remaining assets in the most tax efficient way. The tax rate payable on the remaining assets will only be 10% if entrepreneurs’ relief is available.
Members’ Voluntary Liquidation (MVL) – Bailey Ahmad (babr.co.uk)
There are many reasons why a company might cease to trade. Examples include:
- Completion of a project which a company was specifically created for
- Sale of a company’s business
- Retirement of a company’s owners
- When a self-employed contractor no longer needs their company because they have moved into employment
- The simplification of a group of companies
Members’ Voluntary Liquidation (MVL) – Bailey Ahmad (babr.co.uk)
Generally, an MVL is a tax-efficient process for shareholders to receive the surplus cash/assets from their company. This is because, in an MVL, the payment of surplus assets/cash by a liquidator to shareholders is treated as a capital distribution for tax purposes. Capital distributions are subject to capital gains tax, which may be more tax efficient. In certain circumstances, shareholders may also qualify for Entrepreneurs Relief which reduces the tax on the capital gain even further.
Administration
Administration is a formal insolvency process which is usually exercised to gain breathing space from creditor action, such as the seizure of company assets, bailiffs entering the premises, or a winding-up petition being issued. Administration gives a company time to assess its best options and create a strategy so that the best results can be achieved. The options of administration could be either a pre-packaged sale of the company, entering the company into a company voluntary arrangement or liquidating the company. This means that in terms of selling a company, administration offers several advantages to both the company and its buyer, such as a seamless transfer of the company to its new owners, not only maximising the value of the sale but also minimising the disruption to company business.
An Insolvency Practitioner can be appointed as administrator of the company and should have the following objectives in mind:
- To rescue the company as a going concern
- To achieve a better result for creditors as a whole than would be likely if the company was wound up
- To realise property in order to make a distribution to secured or preferential creditors
An administrator can be appointed by:
- The company
- Its directors
- One or more creditors
- A liquidator (if already in liquidation)
- A secured creditor
There are several ways that a company can be placed into administration, these are dependent on the company’s circumstances. If the company is not subject to a winding-up petition, then a company is able to be placed into administration simply by filing documents to the courts. This can be done without a hearing being required meaning that placing a company into administration is a relatively quick process.
Individual Voluntary Arrangement (IVA)
An individual voluntary arrangement (IVA) is a legal agreement between an individual and their creditors to repay their debts, usually through an agreed affordable monthly payment over a five-year period. The amount agreed to must be reasonable and usually results in a percentage of the debt being repaid and the remaining balance being written off. For an IVA to come into effect, at least 75% of creditors who vote on it must agree to its terms.
At the end of your IVA any unsecured debt left is written off.
You can also make a one-off payment known as a lump-sum IVA, which will mean that an IVA may only have to last a few months.
- Creditors will receive a more favourable return than in a bankruptcy scenario
- Individuals will avoid the stigma, restrictions and consequences of bankruptcy as well as maintaining control of their estate
- Interest on debts will cease to be applied on approval of an IVA
- In certain circumstances, creditors will write off a significant proportion of their debt
- Once complete, an individual voluntary arrangement will leave the individual debt-free
Before we can consider the various solutions available for an individual, it is important to first understand what the term insolvent means.
An individual is insolvent when they have insufficient assets to cover their liabilities/debts or are unable to pay debts when they fall due.
Bankruptcy
Bankruptcy is a procedure designed to deal with the affairs of an insolvent individual for the benefit of his or her creditors. Bankruptcy is generally administered by a licensed insolvency practitioner who is referred to as a trustee. When a person becomes bankrupt, control of their assets (referred to as their estate), with some exceptions, passes to the trustee. He or she realises them for the best possible value and distributes the proceeds to the bankrupt’s creditors.
A statutory demand can occur when a creditor is owed more than £750. The creditor will usually take the step to have the debtor either prior to issuing a winding-up petition (in case of a company) or being declared bankrupt (in case of an individual). Once a statutory demand is received the company has 21 days to respond to it, this involves either paying the creditor in full or bringing the debt back below £750. If the company or individual wishes to repay the debt but are not able to do so, then they may be advised to investigate an arrangement through either a CVA (company) or an IVA (individual).
The answer to this is usually dependent on your individual circumstances and the equity position in the house but often the answer can be yes. Firstly, the equity in the house needs to be determined and this can be done by having the property valued and receiving an up-to-date mortgage statement. Once the property has been valued the equity would need to be purchased by a third party (often a family member) and then a deed of assignment / declaration of trust would need to be prepared and filed at the land registry. This area of insolvency is extremely complicated and fact dependent and we would highly recommend that advice from a licenced insolvency practitioner is sort out.
On being declared bankrupt, the beneficial interest in the home will automatically vest in your trustee in bankruptcy. Your trustee will have three years to deal with the property and usually family members will retain the rights of occupation for a period of one year. If there is no equity in the property then the trustee will not look to sell the home, however if there is equity then the trustee will need to realise the equity and there are several different ways that this can be done. The property could either be sold or a family member could buy out the trustee’s interest. This area of insolvency is extremely complicated and fact dependent and we would highly recommend that advice from a licenced insolvency practitioner is sort out.
Informal strategies and refinancing
There are a number of advantages to this approach including:
- It is inexpensive as negotiations are often dealt with by the individual
- There is no court involvement
- Directors remain in control
- No informal insolvency process is entered into
- The disabilities, obligations and stigma of bankruptcy are avoided
Cash flow solutions
The creditor can petition the court to force an insolvent company into compulsory liquidation. A creditor can present a winding up petition if they are owed more than £750 and it has been unpaid by more than 21 days. After a winding up petition has been served, the courts will hold a hearing to establish if the company is truly insolvent and cannot pay its debts. If the company is deemed insolvent, the court will iss
After receiving a Winding up Petition you will have 7 days to act. It is important that you respond immediately, or risk your company being forced into liquidation.
A winding-up petition is an application made by a creditor to the high-court for the compulsory liquidation of a company. This tends to be the final action that creditors would take against a company in order to recover their debts, and the creditors would have to pay a non-negotiable fee to file the petition. For a creditor to file a winding-up petition, they must be owed a sum greater than £750. Once a winding-up petition has been received, company directors should contact a licenced insolvency practitioner.
Debt recovery
Our debt recovery process is based on a combination of our team’s extensive industry experience, coupled with the feedback from the ever-changing business environment and specific industries we work with. We use the full range of communications methods available to contact and engage, maximising the probability of a successful recovery.
A standard cycle is anywhere between 1-60 days, with the optimum timing, frequency and volume of communications used.
If we’re unable to secure a result within this time we’ll recommend the most appropriate next steps e.g., tracing, field agents, legal action, close etc.
As an end-to-end service provider, we’re able to manage the process from early-stage arrears through to litigation. If tracing, field agent or legal services are required, our expert panel of trusted suppliers deliver this via us, meaning cases are always progressing and you have the same point of contact throughout.
We work with businesses of all sizes across all industries who have challenges with slow/non-payers. Our clients include accountants, fintech’s, property companies and more, with debts ranging from hundreds of pounds to hundreds of thousands of pounds.
We tailor our approach to suit the specific situation.
To initiate debt recovery, we will require details about the debtor, the debt owed, and any relevant documentation required. If we require anything further, we will liaise with you.
We’re not fans of lengthy processes, so aim to keep things simple and clear – our referral process is no exception.
- Read, agree and sign a service contract (it’s not onerous but we need to ensure both us and our Clients are covered)
- Provide the invoice(s) and contact details for the debt along with any other information you think would be useful
- Sit back and let us do what we do best!
Our fees are typically contingency based, meaning we will only charge a percentage of the recovered debt.
Our commission rates are on a no collection-no commission basis, which means we only charge when funds are successfully recovered.
Starts from 15% and is dependent on factors such as the age, size and nature of the debt. Where there is recurring debt or several cases, we can review these and provide flexible pricing that is transparent and fair.
If additional services are required (tracing, legal etc.) we typically deliver fixed price quotes which are agreed with you in advance, removing any unexpected bills further into the process. Our longstanding relationship with our suppliers means we’re offered very competitive rates, which our clients can benefit from.
Here at BABR we offer a proven track record of success, experienced professionals, and a commitment to treating customers fairly.
The time it takes to recover debt varies depending on the individual circumstances of each case and the debtor’s cooperation. We always aim for the most efficient resolution.
After carrying out a full review of the specific circumstances we will work with the debtor to explore potential solutions to maximise the recovery for you the client.
We will provide clear reporting of your file(s) and can provide an audit trail of all correspondence and an expected outcome. We aim to keep you as informed as you require as part of the tailored solution we offer.
Debtors have rights, including the right to dispute the debt and request verification, we respect these rights and will abide by the relevant laws.
Each case will have its own unique sets of circumstances, we will always work within a framework of the relevant insolvency laws to determine the best course of action and maximise any recovery.
Absolutely, our experts are here to provide guidance on proactive debt management strategies, not just recovery.
Credit control
Outsourced credit control involves enlisting a third-party service to manage and streamline your credit control processes. It can benefit your business by improving cash flow, lowering DSO, reducing late payments, and allowing your internal team to focus on core activities.
Our team of experienced credit control professionals will work closely with your business to understand your credit policies and procedures. We can then manage invoice chasing, credit risk assessment, and collections, ensuring timely payments from your clients.
Absolutely. Our services are tailored to suit businesses of all sizes. Small businesses often find outsourcing beneficial as it provides access to expert credit control without the need for a dedicated in-house team.
No, you won’t. Our goal is to enhance your credit control processes while maintaining positive customer relationships. We work collaboratively with you to ensure a seamless and professional experience for your clients.
We take data security seriously. Our systems are equipped with the latest security measures, and our team adheres to strict confidentiality protocols. You can trust us to handle your financial data with the utmost care.
Yes, our tiered offer a flexible and customisable solution to your needs and budget. Whether you need assistance with specific aspects of credit control or a comprehensive solution, we can tailor our services to meet your unique requirements.
We have experience working with diverse businesses, adapting our services to meet the unique needs of each sector.
We provide regular updates and reports on the status of your credit control activities.
Getting started is simple. Contact our team, and we’ll schedule a consultation to discuss your specific requirements and tailor a solution that best suits your business needs.
Our team’s expertise, commitment to customer satisfaction, and tailored solutions set us apart. We prioritise building long-term partnerships and delivering results that positively impact your bottom line.
