Insolvency Disputes

Insolvency disputes can arise from the time an individual or company enters into the statutory regime of the Insolvency Act 1986 and the supplemental legislation.

Learn more about how to navigate these cases with BBS Law here.

What is an Insolvency Dispute?

An insolvency dispute is a conflict case that arises during the process of insolvency or bankruptcy proceedings. These disputes can involve various parties such as debtors, creditors, shareholders, and insolvency practitioners.

A person or company can enter the insolvency regime either voluntarily or when imposed by creditors.

Insolvency disputes cover whether an individual or company should fall into the insolvency regime and disputes surrounding the historic conduct of former directors.

Circumstances Involving Insolvency Disputes

There are a range of circumstances that apply to insolvency, for example, the instance of application to set aside a statutory demand to enforce a debt, to more complex insolvency litigation matters, such as an application to make a former director personally liable for a company’s debts.

The former can often involve a highly contentious application as to whether or not an individual or company owes an “undisputed debt”. This being the key to entitle a Court to Order an individual be made bankrupt or a company be placed into liquidation.

The latter can involve a forensic analysis of the conduct of the former directors of a company spanning many years.

This is often undertaken for the purpose of showing that the former directors have breached their fiduciary duties to the Company when it was solvent and that such action now results in them becoming personally liable for their actions.

Example of an Insolvency Dispute

An example of complex insolvency litigation matters include the scenarios in which businesses are struggling financially, thus then hire insolvency practitioners to ensure that the distribution of assets is fair and in accordance with insolvency laws, while trying to preserve as much value as possible for all stakeholders involved.

What are the conditions for insolvency?

Insolvency is defined as when a company or individual is unable to pay debts as they fall due or where liabilities exceed assets – the term is used for both businesses and individuals.

What Happens When a Business Goes into Bankruptcy

When a sole trader or a partner in a business is made bankrupt all of their assets fall into the control of the trustee in bankruptcy. Their role is to understand all of the bankrupt’s debts, realize all of their assets and then distribute the proceeds of those assets to all of the creditors in accordance with a strict statutory formula.

Leading on from this are the disputes in insolvency, which may often arise from overdrawn directors loan accounts.

This is where a director has borrowed money from the company on the assumption that they will declare a dividend at the end of the financial year.

This is often how directors pay themselves as it is often tax efficient.

However, it can cause problems when insolvency occurs as the loan is a debt that needs to be repaid.

Why Choose BBS Law for Insolvency Disputes?

Nobody wants to be in a position where their business is in financial turmoil, so seek the help of professionals and choose us to solve your contentious insolvency matters.

We are experienced, highly educated with expertise in a range of legal sectors, including key stages of insolvency such as debt recovery and or bankruptcy.

We can help keep your business on the right track so you can avoid any complex outcome that leaves your business in the dark.

Contact us today for more information on how we can help you with your case and for more information, see our FAQs below.