Often an Insolvency Practitioner (‘IP’) may state to potential clients that everything will be fine. This comment is one that I heard come from the lips of many an IP at the initial client meeting regarding the client’s personal or corporate insolvency. This leads to company directors and individuals blindly appointing the IP without fully understanding the ramifications to them personally from such an appointment.
As a potential client is paying to use the services of a Liquidator or Bankruptcy Trustee, when self-appointing, the client is often of the false belief that the IP who takes on the role of Liquidator or Bankruptcy Trustee is working for them personally. It is not until the matter has commenced does the client realise that the IP has a legal fiduciary duty to represent creditors and not the director or individual.
Usually this realisation comes when the client receives a demand from a Liquidator in relation to excessive withdrawals of funds, repayment of debtor loans or an insolvent trading claim. This realisation also rings true when an IP acting as Bankruptcy Trustee lays claim against a family home, thus disrupting family harmony.
In many of the above cases, the client and the client’s external advisor were solely focused on the issue at hand which is usually a demand from a creditor. Even though the appointment of an IP was able to deal with the issue of the creditor’s demand, the long-term effect may have been over looked by this haste to appoint without taking the time to correctly analyse the situation from a holistic point of view.
This does not need to be the case. Insolvency can be carefully planned.
It is important when considering the appointment of an IP, that all avenues be fully considered as well as the ramifications of the insolvency event to either the director personally or the individual’s business or company. Properly preparing for such an event is the most important activity your client can undertake. Having an independent expert such as de Jonge Read, review the balance sheet of your client’s company and discussing your client’s personal asset position is a good way of ensuring that things will run as planned.
At de Jonge Read, we listen to your client and pride ourselves on providing your client with free comprehensive, tailored, written advice. We discuss with you and your client our written recommendations. By engaging de Jonge Read, we remove the surprises by fully explaining the process and identify any issues that may arise should an insolvency appointment be made.
We will look after your client and assist them through every step of this traumatic period of their lives as “We walk beside your client, not behind them”.