Credit Management September 2023

SPONSORED CONTENT
Statutory Demand
served/ Demand for
payment sent
Petition presented
in Court and served
on company
Petition
Advertised
Hearing
Date
Compulsory
Winding up Order
made
Official Receiver
appointed
↘
Creditors’ report
within 8 weeks
↘
↘
Creditor’s nominate
& appoint IP
Investigation
of antecedent
transactions
↘
Return to
creditors
Winding up order
If the order is made, your petition costs
will be paid as a priority debt from any
recoveries made from the insolvent
company after the Official Receiver (“OR”)
costs.
The OR will open an Insolvency Service
Account ** and will carry out initial
investigations into company transactions
and review the conduct of the directors.
Menzies’ creditors services team can
liaise with the OR on your behalf in
order to ascertain progress made with
interviewing the directors, collecting in
the books and records and overseeing the
recovery of assets in the liquidation.
Menzies will collate information as to
what the asset and liabilities position may
look for the company creditors and report
back to Shoosmiths and/or the client.
Where necessary, Menzies will provide
the OR with information to support them
in their role.
If an Insolvency Practitioner (“IP”) of
Menzies can add value by securing the
appointment as liquidator and there
is sufficient creditor support, then the
creditor services team will liaise with
the OR to secure the appointment as
liquidator of the company. The value add
may be where suspected wrongdoing has
occurred.
The appointment will not incur any
additional cost to the creditors. IPs
are typically remunerated from the
realisations made in the estate.
IP appointed as Liquidator
Once appointed, it is an IP’s duty to realise
the assets of the company for the benefit
of the company’s creditors. Assets are
realised at best price achievable in the
current marketplace. Investigations into
the company’s dealings and the conduct
of the directors will be continued by
Menzies’ IPs and new lines of enquiries
may be opened. The OR has the continued
obligation of reporting on the director’s
conduct, however the IP would always
share information with the OR, so that
their efforts are aligned.
Investigations
Apart from the automatically void
transactions that occurred between
petition and order dates, an IP will also
look at transactions that occurred prior to
the petition date and may fall under the
following categories:
• Payments made to one creditor in favour
over others prior to insolvency (known
as preference payments)
• Transactions made at an undervalue
(for no consideration or significantly
less than assets value) and transactions
defrauding creditors
• Claims relating to the conduct of the
directors and/or company actions prior
to the insolvency, including:
o Claims for the misapplication or
retention of company money or
property, or breach of director’s
duties (referred to as Misfeasance);
o Wrongful trading; and
o Fraudulent trading.
Shoosmiths will assist Menzies to gather
and review evidence to support any
potential claims which may result in
returns to the company’s creditors. In
a scenario where a claim is found, for
example a director has paid out material
company monies to pay a relative without
justification, Shoosmiths will prepare
and issue a letter of demand, or a letter
before action (“LBA”) in relation to that
claim. This may lead to payment from the
parties involved, prior to the issue of legal
proceedings.
In the event that following a demand
and/or LBA no payment is received,
then an element of due diligence will be
carried out on the personal wealth of the
respondent to the potential claim (often
a former director of the company) and
a cost/benefit analysis will be carried
out by Shoosmiths and Menzies before
taking matters forward. A claim with
good merits may be funded by, or
sold to, a litigation funder to pursue.
Shoosmiths would continue to act in these
circumstances.
In the event that it is not cost effective
to pursue a claim, it is possible to refer
director and/or company conduct back to
the OR, who may pursue matters further
at their cost if there are policy and/or
public interest reasons for doing so.
A successful claim by an IP will (subject
to enforcement of a money judgement)
result in a payment into the liquidation
estate. Payments from liquidation will
be made to creditors in the order set
out by insolvency law, which means
any secured and preferential creditors (
such as employees and HMRC) will be
paid out first following payment of the
liquidation expenses. Unsecured creditors
will be paid out equally thereafter. In
these circumstances, you may not make a
full recovery of your debt, but as set out
above, your petition costs will be paid out
in priority and, justice will be achieved
in respect of any wrongdoing by the
company and/or the directors.
Tackling ‘ill-gotten gains’
If you are aware of a director that has
not been acting in the best interests of
the company’s creditors and you want to
ensure that their actions are adequately
reviewed, then feel free to get in touch.
* deminimus level is still £750
** General Fee of £6,000 and Admin Fee of £5,000
Shoosmiths will assist Menzies to gather and review
evidence to support any potential claims which may
result in returns to the company’s creditors.
Brave | Curious | Resilient / www.cicm.com / September 2023 / PAGE 48