Insolvency solicitors in Scotland

Insolvency solicitors in Glasgow advising across Scotland

A business may be insolvent if it cannot pay its debts as they fall due, or if its liabilities are greater than its assets. When that happens, the law changes what directors can and cannot do. Directors must give proper weight to the interests of creditors, and once insolvent liquidation or administration cannot be avoided, those interests come first. Getting legal advice early gives you the most options, and can make the difference between rescuing a business and losing it.

Our insolvency lawyers advise directors, shareholders, business owners and creditors across Scotland from our Glasgow office, and regularly deal with matters in Edinburgh and throughout the country. We cover corporate and personal insolvency, and work closely with licensed insolvency practitioners and accountants, and with our own commercial litigation and corporate teams, so you receive joined-up advice on insolvency law, restructuring and the practical and financial issues. Our solicitor will explain the insolvency process in plain English and help you choose the right way forward.

Legal advice for a director of a struggling company

If your company is in financial difficulty, your duties as a director shift. You must consider the interests of creditors, and you may face personal liability if you get things wrong. We advise directors on:

• Wrongful tradingIf a director knew, or should have known, that insolvent liquidation or administration could not be avoided and did not take every step to minimise losses to creditors, the court can order them to contribute personally.
• Fraudulent tradingCarrying on business with intent to defraud creditors can lead to personal liability and criminal penalties.
• Personal guaranteesYour exposure under guarantees given to banks, landlords and suppliers, and how to negotiate with them.
• Overdrawn loan accountsA liquidator will usually seek repayment of money owed by directors to the company.
• Director disqualificationInvestigations by the Insolvency Service and disqualification proceedings, which can ban an unfit director for between 2 and 15 years.
• Challengeable transactionsGifts or transfers for inadequate value (gratuitous alienations) and payments or securities that favour one creditor over others (unfair preferences) made before insolvency can be challenged under Scots law, with a longer look-back period where the recipient is connected to the company.

Restructure or liquidation? Corporate insolvency procedures in Scotland

Scottish companies have access to the same corporate insolvency and restructuring procedures as companies elsewhere in the UK, under the Insolvency Act 1986. The right procedure depends on whether the business can be saved:

• Company voluntary arrangementA binding agreement with creditors to pay all or part of the company’s debts over time, while the business keeps trading.
• MoratoriumA short breathing space from creditor action, overseen by a monitor, while a rescue is explored.
• Restructuring planA court-sanctioned compromise with creditors or shareholders under Part 26A of the Companies Act 2006.
• AdministrationAn administrator takes control to rescue the company or achieve a better result for creditors, sometimes through a pre-pack sale of the business.
• Creditors’ voluntary liquidationThe shareholders resolve to wind up an insolvent company, usually on the directors’ recommendation, and the creditors have the final say on who is appointed as liquidator.
• Compulsory liquidationA creditor or the company petitions the Court of Session, or the Sheriff Court for smaller companies, to wind the company up.
• Members’ voluntary liquidationA tax-efficient way to close a solvent company and distribute its assets to shareholders.

Apart from a restructuring plan, these processes must be run by a licensed insolvency practitioner. Our role is to advise you on your rights and obligations, deal with the legal documents and court applications, and protect your position throughout.

Advice for creditors, including debt recovery and litigation

When a customer or tenant becomes insolvent, we help creditors understand where they stand and how to maximise their recovery. We advise on presenting a winding up petition, lodging claims with a liquidator or administrator, voting on a CVA, retention of title claims, landlord’s rights and challenging the conduct of directors. If you are owed money by a business that is not yet insolvent, see our debt recovery service.

Personal insolvency, bankruptcy and sequestration

Partnerships and sole traders are treated differently from companies. In Scotland, bankruptcy is called sequestration. An individual or a partnership can be sequestrated under the Bankruptcy (Scotland) Act 2016, and the process is overseen by the Accountant in Bankruptcy (AiB). A trustee is appointed to take control of the debtor’s assets and distribute them to creditors.

Alternatives to sequestration include protected trust deeds and the Debt Arrangement Scheme. We advise business owners facing personal insolvency, partners concerned about their liability for partnership debts, and creditors who want to petition for sequestration.