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Over recent years, there have been a few high-profile business casualties to hit the headlines, probably BHS was the most famous example of a high-street brand hitting the rocks although Woolworths can’t be far behind. When these “celebrity insolvencies” make the news, they can come along with attention-grabbing figures about the costs involved in winding them up. While these figures may well be accurate, the reality is that there’s almost certainly going to be a whole lot more work involved in winding up a major corporation than there is in winding up an SME.

The cost of an IP is probably going to be much less than the cost of trading when insolvent.

Continuing to trade when you know you are insolvent is illegal. The law is absolutely crystal clear on this point and ignoring it can open up a whole world of expensive pain at a later date. What company directors may not realize, until it is too late, is that getting a good insolvency practitioner on board early may actually mean a company can avoid liquidation, for example by moving into pre-pack administration or a company voluntary agreement. Even if not, IPs can help to make the path to liquidation as smooth as possible.

IPs will ensure regulatory compliance, which will be included in the cost of their fees

Liquidation is a process and some of the steps involved are laid down in law. IPs will make sure that all legal obligations are met both in full and as painlessly as possible. For example, an IP will be mandated to investigate whether the behaviour of the company directors could be reasonably construed as unethical. While it is their legal and ethical duty to be thorough in their investigations, good IPs will also exercise tact and sensitivity and will attempt to accommodate the directors’ other responsibilities when arranging interviews with them. In addition to all of this, the job of an IP may involve them wearing many different hats such as an Officer of the Court, a supervisor of a voluntary arrangement, a Trustee, an administrator and/or a liquidator.

The cost of an IP will depend on who you hire and what they need to do

IPs based in the big accounting companies tend to charge much higher fees than their independent counterparts, but they also tend to have the skills and experience to deal with challenging situations such as the liquidation of major corporations, which may come under significant scrutiny from all kinds of angles starting with the press and moving on to regulators and even MPs. This is way above and beyond what is usually required to wind up an SME. The fees charged by independent IPs will depend on various factors, including the geographical area in which they work, the level of skill involved and the number of hours worked (and by whom) and whether or not the nature of the work is likely to expose them to danger. With regards to this last point, it’s worth remembering that liquidation can be an emotionally-charged situation and IPs can find themselves on the receiving end of people’s frustrations. IPs fees can be set at an hourly rate, stated as a flat fee or calculated as a percentage of realizations.

IPs can provide advice which is literally invaluable

He who pays the piper calls the tune. An IP appointed by a company’s creditors will look out for their employer’s best interests and will do whatever they can to recover as much money as possible, including exploring all avenues to make directors personally liable for company debts. By contrast, an IP appointed by a company’s directors will give as much help and guidance as they legally can so that directors can avoid being saddled with personal liability for company debts.

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