Solvent Liquidations and Advice from Insolvency Practitioners
Planning for Solvent Liquidations – the Practical Stuff to Think About
This latest in our series of ‘cautionary advice’ looks at some of the practical stuff that needs to be thought about when it comes to solvent liquidations – Members Voluntary Liquidations. All MVLs focus on the client’s desire to get the maximum distribution from the reserves of a company in the shortest time possible and in the most tax efficient manner.
However, all solvent liquidations are different and all practical aspects need careful consideration and planning before the process starts. Existing professional advisors (solicitors, accountants) will have been involved for some time in the client’s decision to sell their business or simply stop trading and we are called in towards the end of the process to deal with distributing the reserves.
Calling us in Earlier can Help Make the Process More Efficient
As we have seen in severtal recent members voluntary liquidations, calling us in at the initial planning stages can help smooth out the process for the client and avoid delays and costs in dealing with practical considerations in the eventual liquidation.
In just three of our more recent cases, opportunities for a better, smoother and more timely outcome for the clients were identified and future problems avoided.
- Spotting the need for a 10 year run off insurance policy to protect against contingent liabilities, which would have otherwise have slowed up or even stopped the distribution of reserves to the client
- Dealing with the practical aspects of a debenture which secured deferred consideration due to the client company after the sale of the business. Advisors dealing with the sale of the business had, quite rightly, put the debenture in to protect the deferred consideration. However, whilst the deferred consideration could be distributed by way of an assignment, debentures can’t be transferred and the liquidation will have to stay open for six years. It was too late for the solutions available.
- Again, another sale of a business where the selling company was to be placed into liquidation after the sale concluded. When we were brought in, we identified a concern with warranties and guarantees given by the selling company which did not expire for three years. This causes issues when it comes to distributing reserves without knowing whether the guarantees will ever be called on. There were potential solutions to this issue but it was too late to look at these once the sale had taken place.
The More Thought and Planning, the Smoother the Process (and the Happier the Client!)
Where professional advisors had been dealing with these clients for some time and assisting in the sale of the business, the last thing a client wants to hear is that there are problems when it comes to the final stage and the liquidation of the company. This is, after all, the stage where the shareholders receive the benefit of the reserves and any delays may even have a reputational risk for the existing advisors.
How Can We Help?
We like to think of ourselves as “the professional advisors’ advisor”. So, if you have a client who is looking to sell their business or cease trading and requires a solvent liquidation to access the reserves, bringing us in early could help the whole process run that little bit smoother. Please contact us or call us on 0121 200 2962.
