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Business Debt – where to get help?

If you are under pressure as a result of business debts and need independent, impartial advice, unbiased by self interest and without the risk of your vulnerable state being exploited for financial gain, to whom can you turn?....

Accountants

Typically directors of SME companies will have access to professional financial advice, through their relationship with their accountant and often this is the first port of call. The response you get will depend on a number of factors.

Dealing with financial distress is often not a core skill of an accountant who typically may be more comfortable dealing with their client’s tax affairs. Some accountants are, however, ‘hands on’ and like to try to help clients by getting involved in the nitty gritty of their business affairs and may have previous experience of helping other clients who have been through similar situations. Whilst this may be helpful in some circumstances, you should be slightly wary that an accountant who does not specialise in this complex area may be out of date or even with the best intentions, may not have the most comprehensive understanding of the options available.

Most accountants will have a relationship with an insolvency practitioner and if they feel your situation warrants it, they are likely to refer you to their preferred specialist. It is worth being aware that referral fees and commissions are not permitted to be paid by insolvency practitioners to introducers.

Insolvency Advisors

Although not qualified in any way, the opportunity for making apparently easy money has led to a number of individuals and firms setting up in business to offer ‘insolvency advice’. The quality of advice can vary enormously, but as these advisors are completely unregulated, the promises made and motives behind the ‘service’ may not be completely above board. Often these firms market themselves as ‘acting for you, not your creditors’, or suggesting that they can use some ‘insolvency’ process to clear away your debts without any damage to your business. The first thing to note is that in following this advice, it is you, not them, who will be taking all the risk. The truism applies that ‘if it looks to good to be true, it probably is’. Directors of limited companies have legal responsibilities to the company’s creditors, so an advisor that is ‘acting for you’ and ignoring your responsibilities, is clearly exposing you to personal legal threat, which can include criminal proceedings.

An insolvency advisor who promises you a ‘debt free’ business using a ‘prepack’ or some other business transfer process to a debt free company, could also be leading you into a whole pile of trouble.  The legal facts are that the assets of the business, belong to the company and the creditors are entitled to be paid according to the value of those assets. Any transfer of assets at an undervalue can be challenged and it is you the director who will be held responsible, not the ‘insolvency advisor’, who may well just disappear when called upon to justify their ‘advice’. In addition, attempting to continue the business through some devious means, is unlikely to be looked upon favourably by the company’s creditors, including landlords, banks, HMRC etc, all of whom you may well need to deal with in the new company and unless the process is totally above board, you may well be jumping out of the frying pan and into the fire.

Insolvency Practitioner

Legally, insolvency practitioners are regulated and licenced to provide the advice that you are seeking. They have the legal knowledge and experience to be able to ensure that you fulfil your responsibilities, whilst at the same time they should be able to provide you with practical and honest advice. The difficulty is that insolvency practitioners are often accused of only being interested in putting the company into an insolvency process, so that they can earn fees out of dealing with the insolvency. This apparent conflict between giving honest practical advice and recommending a course of action where they stand to earn more fees makes it difficult to know whether to trust the advice.

‘A man in the pub’

I wish I knew where this pub was, as it is the fountain of all knowledge! It amazes me the number of times that directors tell me that with their business and livelihood at stake, they have taken and acted upon advise from ‘a man in the pub’, a friend, a relative, a well meaning business contact, who went through a similar situation and as a result apparently became a leading expert, despite the years of training and experience required to be a qualified professional advisor.

Any advice from a ‘man in the pub’ should be taken with a pinch of salt. Having been a licensed qualified insolvency practitioner for many years, the one constant fact has been that every situation and every client is different and there is real skill and knowledge required to provide the best advice in the individual circumstances.

Internet

The ‘man in the pub’ is slowly being replaced by the internet as the ‘fountain of all knowledge’. The problem is that the infinite monkey theorem can be applied to some content found on the internet. The infinite monkey theorem states that a monkey hitting keys at random, on a typewriter keyboard, for an infinite amount of time will almost surely type a given text, such as the complete works of William Shakespeare. There are an awful lot of monkeys inputting insolvency advice in articles on the internet, and I am currently eating a banana to prove it. Whilst the internet is a great source of background reading, it does not take the place of individually tailored advice from a trustworthy and accountable source.

So what is the answer to the question? Who can you turn to?

The simple answer is ‘me or one of my colleagues’ despite the fact that I am eating a banana!

To misquote what Mandy Rice Davies said in court in 1963, following the Profumo affair ‘you would say that wouldn’t you’? Well yes I would, but in this case it’s true. We are licenced, regulated, insured, insolvency practitioners. We have been in business for many years and we receive nearly all our introductions from our client’s trusted professional advisors and through our reputation for providing independent, impartial advice, unbiased by self interest, and without seeking to exploit our client’s vulnerable state for financial gain. Our reputation is that we will not seek to guide you towards an insolvency process, unless absolutely necessary and only after careful consideration. In fact we also offer a range of services, under our Cashsolv brand specifically designed to help companies avoid insolvency. If you are under pressure as a result of business debts, don’t despair, don’t throw in the towel, turn to us and explore every opportunity to get your business back on track. We can help.

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