Insolvency Advisors? Know who you are dealing with!

There is a large number of websites on the internet offering turnaround advice and insolvency advice on the options available for all types of businesses.

Usually there is less legal protection for businesses – especially companies – than there is for consumers. The general rule is that business owners are expected to be able to make informed decisions.

Unfortunately, when businesses find themselves in distress the directors, or partners, may make decisions in haste and working with advisors who are not what they seem initially.

A good rule of thumb to begin with is this… all quality advisors in the insolvency world have to be regulated by a regulatory body or group.

So, what do you need to look for when looking for turnaround and insolvency advice?

Who is behind the website – who are they?

Perhaps the most important thing is check that you can see exactly who the advisors are, where they are based and which regulators they have.

Websites are required in law to have a trading and contact address so that you can check these contact details. If there is no company name, no trading name and no contact details DO NOT CONTINUE TO USE THEIR SITE. We have found that too often these sites are giving incorrect advice or answers.

We have found a large number of apparently decent websites that do not have any details about who works there, who is providing the guidance, who is their regulator and who runs the business. Many are not an actual professional advisory company at all.

No, they’re trying to get your contact details as a lead, to then sell. What they may do is sell your lead onto someone else who may be a regulated and quality advisor, but this is usually for a fee. Overall this may end up costing you, the customer, more than was originally expected as you may have to pay a commission and professional fees.

Our advice is to always ask “are you a regulated firm of insolvency and turnaround advisors or a web marketing company”? If they are both that’s fine usually.

They approach you direct

There is nothing wrong with this in theory as directors do sometimes need to be persuaded to take action quickly when stress and insolvency worries loom. Please do bear in mind the point above before deciding to go with them. Again, ask them who they are and who their regulator is.

They don’t ask enough questions and suggest liquidation FIRST

After talking to tens of thousands of worried directors and sole traders since 1995 we know that every case is different and there are different solutions for different problems. Some advisers will send you down a particular path such as liquidation or pre pack administration without knowing enough about the facts and will discount other options out of hand. They will not consider the objectives you have and then suggest the most appropriate range of options. A rescue could be more suited to your company, so ask “what about rescue options”. Again this is because they’re trying to sell your lead.

They tell you that any and all advice is free

Obviously if a company is short of money then promises of help not costing anything is tempting i.e the creditors pay?

Be honest and think this through. Is it too good to be true?? Most likely! Even if they do some work for free it is likely to be of low quality and may well expose you to personal risk. As regulated advisors we have to discuss all options with you as part of our compliance requirements. We always offer a free discussion by telephone of the options of course,  and we also set out the costs that will need to be paid for professional advisors, or insolvency practitioners to act for the company; in writing.

Also in some cases advisors will say that any payments of say turnaround or CVA fees should be personally guaranteed. So, if the business fails in its turnaround the insolvency advisor gets paid out of YOUR personal monies. Do you want to take that risk? Being blunt the incentives for getting a working solution are not there.

Do not agree to give personal guarantees for insolvency advice or fees.

How long have they been in business?

Check the company, if they have one, on Companies House or www.duedil.com for a proper trading record. Especially if they claim to have been in business for years. We have nothing against new start ups as we all have to start somewhere!

Are they licensed?

This is a crucial point as only licensed insolvency practitioners can act as officers for company voluntary arrangements, administrations, pre packs and all types of liquidations.

Anyone who claims that you shouldn’t speak to insolvency practitioners is basically saying don’t go to someone who is overseen by a regulatory authority and has to abide with strict rules to protect the interests of stakeholders. Instead come to me with no protection or recourse!

In truth though we see less of this poor practice nowadays. You can check to see if a firm employs licensed insolvency practitioners. Bear in mind that as long as the firm has insolvency practitioners in it, then they can take appointments. If there are no insolvency practitioners in the business then they will obviously have to pass the enquiry onto to someone else outside! This could cost you more.

Do they have examples of their work and or testimonials

This is sometimes difficult to obtain. However, case studies are a good indicator of legitimacy. See our huge list of case studies here

KSA Group which operates www.companyrescue.co.uk is a long established company dating back to 1997. We have worked with thousands of people to rescue their business or help put it to sleep if it is no longer viable.