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.

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Insolvency Dispute Solicitors & Lawyers

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.

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Frequently Asked Questions

What are the 4 types of insolvency?

Both individuals and companies can make use of other means of restructuring their debt within the insolvency regime. This includes individual voluntary arrangements, company voluntary arrangements, administration and receivership.

When an individual is no longer able to pay their debts when they fall due they may be made “bankrupt”. This can take place voluntarily at the instigation of the individual or by an application to the court by a frustrated creditor. When a company is no longer able to pay it falls due it may be placed into insolvent liquidation. This can take place voluntarily initially via the directors or by a winding up petition from a creditor.

What is the 10 10 10 rule in insolvency?

Insolvency practitioners and former directors are no longer able to call physical meetings of creditors unless called by at least 10% in value of the creditors, 10% in number of the creditors or at least 10 creditors.

How long can you legally be chased for a debt?

A debt can become time barred. That means that the creditor has delayed too long and the debtor can defend the claim on the grounds that the time for pursuing the debt has expired. The normal rule is that a debt must be recovered within 6 years from the date of the invoice. However, the rules on “limitation” are complex and many issues may interfere with this initial rule.

Does bankruptcy clear HMRC debt?

When an individual is made bankrupt all of their debts fall subject to the bankruptcy. All of these debts are then under the control of either the Court appointed official receiver or trustee in bankruptcy. Assuming the bankrupt co-operates, when the bankrupt is discharged the debt does not continue.

Who gets paid first in insolvency?

Secured creditors with a fixed charge
Administrator/Liquidator fees
Preferential creditors
Secondary preferential creditors (expanded to include HMRC for certain taxes)
Secured creditors with a floating charge
Unsecured creditors (including all other HMRC debt)
Shareholders

What do you need to prove insolvency?

An insolvency situation exists where an individual or company is either no longer able to pay their debts when they fall due. This can be analyzed by reference to cash flow insolvency or balance sheet insolvency.

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I had the pleasure of working with David on some issues we had; from start to finish the experience was very good, and we got the outcome we needed as a company plus very good advice for the future. Overall a 5-star experience.

Effy

Having recently worked with BBS Law to successfully conclude an Intellectual Property infringement case we were extremely happy with the services they provided.

David Bondt expertly guided us through the process and mediation, providing knowledgeable, professional and commercial support at all stages – thanks again David!

Baum Trading Limited

During a very difficult period in our business, we had to seek the help of a professional Law firm. We selected BBS Law Ltd following initial calls with Andrew Haffner and the Litigation Team. The support and unbiased guidance given by Andrew and the team guided us through many nightmare events. The extensive knowledge and professional support given to the complexities of the problem were well understood by BBS Law Ltd.

Hazel James, Managing Director at Brendon International Limited

I instructed David Bondt of BBS Law to deal with a complex intellectual property dispute. The other side were trying to be overly aggressive, but David and his team were able to deal with the situation professionally and robustly on my behalf. Needless to say, BBS Law obtained a very favourable outcome for us and gave very clear and concise advice to me throughout the case. I wouldn’t hesitate to recommend the litigation team at BBS Law.

SR, Client

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