It has recently been announced on gov.uk that a number of firms which offer a “rescue” service for financially struggling companies have effectively been shut down after misleading directors and providing incorrect business insolvency advice.
A total of seven associated firms have been shut down by the secretary of state and placed into compulsory liquidation.
These companies purported to help sell businesses that were in financial distress, misleading former directors by telling them they could keep their company’s assets, continue to trade the business through a new company and avoid any responsibility for its debts.
Bad Businesses Insolvency Advice
Some of the other worrying advice provided includes:
- Advising directors that they were able to avoid having to pay the costs of liquidation by taking up the services they offer as an alternative to using insolvency practitioners.
- Advising directors that resigning their position as directors before formal insolvency proceedings could proceed would remove the risk of any damage to their reputation.
- Advising directors that they could delay providing any information to Companies House in order that they are still able to access the old company’s bank account.
- Advising directors that a new company could use the old company’s trading names without have to pay for any intellectual property rights and advising them incorrectly about the laws which govern the re-use of an insolvent company’s name which have been implemented in UK insolvency law to protect creditors.
The above advice undermines the UK insolvency processes and laws. Because of this, the Secretary of State applied to have these companies wound-up in the interest of the public.
There are also other firms who currently operate using the same business rescue model. Directors are being warned to be aware of any potential misleading and unlawful advice.
How can you Protect your Business from Bad Insolvency Advice?
If in doubt about any previous business insolvency advice sought or if your business is in financial distress, please contact one of our qualified and regulated insolvency practitioners here at BRI Business Recovery and Insolvency. We provide a free initial chat so you can find out the correct and safe way to manage your affairs.