Insolvency – when is an expert not an expert?

When is an expert not an expert? ‍

It is not uncommon for any of us to need the services of someone when we know what we want to achieve but don't really know how to achieve it. Whether what we want is for our car to start, sell our property or turnaround or wind up our business.

In all of these areas the Internet provides us with a plethora of providers each of whom will temp you with their individual selling points in an attempt to get you to reach out. But with most buyers knowing little of the process or requirements, two factors are key to the decision making process:

1. Who is the cheapest?
2. What is in this for me?

This is a very human reaction to a problem where you don't know enough about the detail. But in the situation where you are making a decision as a Director of a company you have a problem, particularly if the business is a small one where the bank holds a personal guarantee and you list a number of creditors as either personal friends or family. That problem arises because of the obligations that statute places upon you and for which your knowledge is implied! The defence of; "I didn't know just won't wash!"

"I am an honest man but I need to ensure that I pay mum off and the kids can stay at private school. This is why we cannot liquidate the company at the moment"

This is almost a direct quote from a Director I advised. I was pleading with him to stop trading immediately as his business was hopelessly and clearly insolvent and had been for months. He didn't instruct me, but rather I found out later that he started taking advice from a so called unlicensed insolvency advisor before the Company slipped off the register without a Liquidation and leaving behind a couple of hundred thousand pounds worth of creditors.

It is again a very human reaction to hunt around for advice until you find someone prepared to say that you are proposing is acceptable. That those making the decisions are under such stress with so many suppliers in contact demanding that their particular bill just needs to get paid will simply add to the pressure.

But, if someone told you that not wearing a seat belt is fine now because of some new government legislation, or that knocking a pedestrian over in your car when they are wearing a sombrero, you wouldn't believe them would you? So why do so many believe that, where a regulated professional says one thing and an unlicensed individual says another, that it is the unlicensed advisor that must be right.

The most frustrating thing for a professional in this area is that, with the proper advice most directors will get what they want from a given situation. This means that the individuals have behaved as they are expected to by our national laws, are therefore protected from the potential action from the authorities and will be allowed to get on with the rest of their working life.

So why do so many choose the unlicensed advisor or the man down the pub? In my experience it is all in the sale! We are bombarded daily with cheap fix products, whether they be toning muscles or cooking curry. Everyone tells us that rather than learn to cook or do some exercise, all you need to do is get your credit card out and ring the number on the screen! A few easy payments will give you the instant gratification you seek!

But, for those not buying the instance sauce or toning their muscles they will almost always expound the virtues of hard work. There are no simple fixes, unless we wish to benefit from them!

And this is what the unlicensed are preying upon, and, it is sad to say this, but in many instances, the various offences committed in the course of these back street wind downs go unreported and unpunished.

But, the world is an ever changing place. How does anyone know what position HMRC will adopt in the coming months and years.
And once they change, do you really want to be one of the ones that they make an example of? Please believe me
when I say they have unlimited resources and a vindictive streak.

So do you want to deal with the issues properly, Or do you feel lucky?