What-is-an-insolvency-lawyer

What is the role of an insolvency lawyer?

An insolvency lawyer is a legal specialist in insolvency law. They assist both the insolvency practitioner and the limited company going through the insolvency process. Sometimes, an insolvency solicitor is needed for intricate situations, like mass layoffs or international transactions.

 

Evaluating the differences between insolvency lawyers and insolvency practitioners

An insolvency lawyer offers advice to businesses in danger of insolvency and assists insolvency practitioners in carrying out statutory insolvency procedures. They also aid individuals dealing with bankruptcy.

An insolvency lawyer may need to address both aspects of an insolvency process: the challenges faced by the struggling business and offering guidance to company creditors.

Insolvency presents a complex situation, sometimes including cross-border transactions, widespread job losses, director wrongdoing, or deceitful business practices. 

But, what precisely is insolvency, and how does it impact a business?

 

Insolvencies: Definition and how does it impact a business?

When a company faces financial decline, there’s a risk it could slide into insolvency. This essentially means it can’t settle its bills promptly, and more broadly, it might owe more than its assets are worth.

Entering insolvency alters a business’s operations and activates certain obligations under UK insolvency law. Initially, the business must decrease trading and appoint a licensed insolvency practitioner (IP) for advice on the next moves. In some cases, the IP may assume control of the business if rescue attempts fail.

 

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What is the job of an insolvency lawyer?

In corporate insolvency scenarios, an insolvency solicitor offers advice as needed and may engage in formal negotiations with creditors if the company’s debt needs restructuring.

They are usually engaged in different phases of an insolvency process, which could include company administration, such as a Company Voluntary Arrangement (CVA), or voluntary liquidation.

The role of an insolvency lawyer in an insolvency process largely hinges on the type of business – its industry, size, and whether it possesses assets of substantial value.

Insolvency lawyers require commercial awareness, business acumen, and strong communication skills to navigate the complexities of the situation. 

They might be involved in various procedures and measures such as company administrations, liquidations, receiverships, voluntary arrangements, creditor negotiations, and legal proceedings related to insolvency matters.

1. Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is a formal restructuring of a company’s debts, often involving negotiations with creditors, which an insolvency lawyer may facilitate. 

The goal is to secure agreement on a proposal that lowers the struggling business’s debt repayments. This fosters financial recovery by releasing working capital, and any remaining debts at the agreement’s end may be written off as necessary.

2. Company rescue – additional funding

Flexible financing solutions, customised to specific companies or sectors, offer an alternative to traditional bank loans. 

Securing a business bank loan can be burdensome, and its terms are often more inflexible compared to alternative finance options. An insolvency lawyer can offer guidance on suitable funding choices for businesses aiming to recover, often maintaining professional connections with various types of alternative funders.

3. Company liquidation

The process of company liquidation, known as Creditors’ Voluntary Liquidation (CVL), leads to the closure of the business after selling company assets. The sale proceeds are distributed among creditors according to statutory priorities, and subsequently, the company name is removed from the Companies House register.

To learn more about insolvency, please contact our partner-led team at Vanguard Insolvency. As business turnaround specialists, we offer a free, same-day consultation to swiftly present your best options if your business faces financial distress. With an extensive network of offices across the UK, professional help is never far away.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.