Insolvency proceedings can be started if a company or individual is unable to repay a debt.
In the case of limited companies, the debt has to be £750 or more – individuals have to owe £5,000 or more.
Under the Insolvency Act 1986, the debt has to be less than six years old for insolvency proceedings to be started.
In cases where a company has voluntarily gone into liquidation, the Insolvency Service may launch an investigation into any perceived irregularities – and directors and board members may face prosecution as a result, with disqualification from holding the position of director one possible penalty.
In insolvency, debts are repaid using the outstanding assets of a company – the debts may be repaid to shareholders or creditors, which can be companies or individuals.
An administrator will be appointed to oversee a company’s financial affairs and will be responsible for repaying any debts once company assets have been traced.
Certain documents must be delivered up to the Registrar at Companies House if a company goes into liquidation.
Duncan Lewis civil litigation solicitors can advise at any stage of a debt recovery process, including advising creditors who wish to begin insolvency proceedings against a company for non-payment of monies owed.
Insolvency litigation can be a final resort in debt recovery – but it may take some time for the debt to be recovered, if at all.
Asset tracing may be an option before insolvency proceedings are commenced, to ascertain any hidden assets a company may hold and which can be used to repay the debt.
In some cases, a company may decide to repay the debt once the threat of insolvency litigation is made – this can be an effective way of recovering debt if a company has sufficient assets to repay the debt.
To commence insolvency proceedings against a company, a winding up petition is presented to the court – or in the case of an individual debtor, a bankruptcy petition – once a letter of claim has been issued.
The debtor can either defend the claim by filing a defence claim in court – or the court can make judgment regarding the debt. If the claim is defended, a further court hearing will be necessary before judgment.
If considering insolvency litigation, it is essential to take expert legal advice as soon as possible.
Duncan Lewis civil litigation solicitors can advise at any stage of the debt recovery process against a company or individual debtor – including advising on alternatives to litigation, such as mediation and dispute resolution, if a claim for debt is contested.
For expert legal advice on debt recovery and Insolvency Proceedings, call Duncan Lewis Civil Litigation Solicitors on 0333 772 0409.