The failure of a business has repercussions for a number of parties, some of which may have competing interests and concerns, which frequently leads to dispute. These situations often necessitate expert counsel to implement legally sound solutions in a very short amount of time. In this article, Insolvency Disputes, we take a look at the process involved and the options available to you.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of insolvency disputes. Once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What are insolvency disputes?
Insolvency disputes can arise when a person or business enters the statutory regime of the Insolvency Act of 1986 and supplementary legislation. A person or business can voluntarily enter the insolvency regime or be forced to do so by creditors. Insolvency disputes involve the question of whether a person or company should be subject to the insolvency regime and the conduct of former directors in the past. Creditors, insolvency practitioners, and former directors are examples of parties involved in insolvency disputes.
Complex insolvency litigation matters include an application to hold a former director personally liable for a company’s debts.
The former can frequently entail a highly contentious application to determine whether a person or business owes an “undisputed debt”. This is the essential requirement for a court to order a person’s bankruptcy or a company’s liquidation.
The latter can involve a forensic analysis of the conduct of erstwhile company directors over a lengthy period of time. Typically, this is done to demonstrate that the former directors breached their fiduciary duties to the company when it was solvent, thereby exposing them to personal liability.
Creditors and debtors are the most common sources of dispute (e.g., disputes over unpaid debts before or during insolvency proceedings and disputes over creditors’ security interests, including protective remedies like freezing injunctions). Disputes can also arise from the actions of directors and corporate advisers, who are frequently insured. In addition to recovering the assets of insolvent entities, insolvency professionals have extensive information gathering powers. Increasingly, litigation funding is available for all these disputes.
Claimants frequently employ litigation as a tactic of pressure or delay. In England, it is relatively easy to initiate legal proceedings, and the courts can assist with enforcement swiftly. The “loser pays” principal for litigation costs encourages early settlement when litigation is threatened.
Frequently, parties use litigation to exert pressure and delay. Out-of-the-money claimants utilise litigation in this manner because they have nothing to lose and hope that litigation will result in a settlement or that a delay will result in a change in their economic standing.
Statutory demand
A statutory demand is served to obtain payment of a debt due now or in the future, or to demonstrate that a person or business is insolvent. When a debt is contested or when a cross-claim exists, a statutory demand should not be served. The party receiving the demand has four options for response:
- void the demand within eight days of receiving the demand;
- make full payment;
- propose payment in instalments; or
- provide collateral as surety for the debt.
Insolvency and liquidation proceedings
If payment is not made following a statutory demand, a petition for bankruptcy and winding up may be filed against the debtor. If the debt is not paid and the court issues a winding-up order, the debtor will likely have all bank accounts suspended and will be forced into liquidation.
Cancellation of winding up orders
If your company has been dissolved, it is possible to petition the court to revoke the dissolution order. This request must be communicated within seven days of the date of the order and supported by financial documentation to demonstrate to the court that the company is solvent.
Company restoration programmes
Applications for restoration may be submitted up to six years after the company’s dissolution. If a company was in operation when it was struck off, a director or member may submit an administrative application to have the company reinstated on the register.
Validation orders
If you are subject to a petition for dissolution or bankruptcy, your transactions will be void unless the court validates them. Before entering into a transaction and/or before a liquidation or bankruptcy order is issued, it is best practice to obtain a validation. The most common type of validation order is one that authorises payment to the creditor who filed the petition. As its function is to ensure that the payment is in the best interests of all creditors, the court will not simply rubberstamp such a request.
Insolvency creditor rights
When a company or person that owes you money declares bankruptcy, all is not necessarily lost. Creditors can claim a portion of the insolvent estate by filing a proof of debt form, and they can influence the outcome of the insolvency by attending or voting by proxy at creditor’s meetings called by the official receiver or insolvency practitioner.
Too frequently, creditors misinterpret the insolvency procedure or are uncertain about what occurs after the actual event. Our solicitors work with the creditors to ensure that their claim in the insolvent estate is maximised and that they exert influence over how the insolvency process is managed in order to increase the overall dividend they receive.
When appropriate, we can facilitate the transfer of an insolvent estate to another insolvency practitioner who will investigate the business’s accounts and directors’ conduct. This frequently results in the discovery of additional assets in the form of claims against directors and third parties, thereby enhancing the total fund available for distribution to creditors.
How we can help
We have a proven track record of helping clients deal with the process involved in resolving insolvency disputes. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to contact our Corporate solicitors
It is important for you to be well informed about the issues and possible implications of an insolvency dispute. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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