Insolvency Ethics

The business of insolvency is an especially tricky area, for clients and Insolvency Practitioners (“IP”) alike.

Insolvency Practitioners have a thankless task:

The point is that in an insolvency situation, most people are not happy, whether you are a shareholder or director who has lost a business, a creditor who has a bad debt, or maybe an interested party looking to buy assets and being outbid, or a customer who has lost a deposit, and so on. We Insolvency practitioners have to sort it all out.

From an ethical point of view this requires a tricky balancing act, in terms of ensuring there is a level playing field for all parties, and being commercial aware to maximise financial returns to creditors.

When a Director approaches an IP for advice, he can be freely advised as to his legal-commercial options as available within the confines of the law. However, should the insolvency practitioner then be appointed say as Liquidator of the Director’s company, the insolvency practitioner then has a principal duty to creditors. He is no longer the Director’s advisor, but an officer of the court, the “Office Holder” who has a conflict of interest risk if he continues to guide the Directors post-appointment.

It is important that Directors remain properly advised throughout the insolvency process, and at Findlay James we strive to ensure that this remains the case, whilst balancing the interests of creditors. Our approach is to work with Directors for the benefit of creditors, both in terms of maximising the returns to creditors from the old company, and if possible assisting the Directors to continue in business, older, wiser, and a potential source of future business for creditors who in most cases are sympathetic to their customer’s predicament.

This sense of fairness ensures a steady flow of recommendations from Directors who have placed their trust in Findlay James and felt sufficiently satisfied to duly recommend our services to friends or colleagues.

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