Insolvency
Unfortunately, some businesses get into financial difficulties, not necessarily through any fault of their own. Whatever the reason, this inevitably can be a stressful period for all concerned. Directors may have given personal guarantees, or the business can be trading while insolvent, unable to pay its debts.
Matters can quickly get out of hand in these circumstances, but if consulted at the right time, we can play an influential role in brokering deals with banks and key creditors which can allow time to restructure the business or a voluntary winding-up with reduced liability on the owners or directors.
Although we are not insolvency practitioners, we work closely with accountants and insolvency practitioners to achieve practical solutions minimising the impact on the parties involved.
Insolvency Frequently Asked Questions
What is insolvency under Scots law?
Insolvency in Scotland means a business or individual cannot pay debts as they fall due, or their liabilities exceed their assets. This can lead to formal insolvency procedures such as liquidation, administration, or sequestration, depending on the circumstances.
How are insolvency proceedings started in Scotland?
Insolvency proceedings can be initiated by the company itself, its directors, or its creditors. Creditors may apply to the court to wind up a company or seek sequestration for individuals and partnerships. In some cases, a secured creditor holding a qualifying floating charge can appoint an administrator out of court, but this is subject to specific Scottish rules.
What are the main differences between insolvency law in Scotland and England?
Scotland has its own insolvency rules and procedures, including separate legislation and court processes. There is no Official Receiver in Scotland; a private Insolvency Practitioner must be nominated. Certain types of receivership available in England do not apply in Scotland, and the process for dealing with partnerships and unincorporated bodies is different, often involving sequestration rather than corporate winding-up.
Can directors be held personally liable for company debts in Scotland?
Directors are generally not personally liable for company debts unless they have given personal guarantees or have acted wrongfully or fraudulently. If a director continues to trade while knowing the company is insolvent, they may risk personal liability for losses to creditors.
What should I do if my business is facing insolvency in Scotland?
Seek legal advice as early as possible. Early intervention can help explore options such as restructuring, negotiating with creditors, or voluntary winding-up to minimise the impact. John Jackson & Dick work closely with accountants and insolvency practitioners to find practical solutions and support you through the process.