When companies face insolvency, they can be forgiven for looking for the cheapest liquidation service possible. Unfortunately for beleaguered business owners though, cheap liquidations are often beset with problems and hidden costs.
Clients of Save Consultants Ltd found this out to their cost recently as it was closed down by the High Court. The Manchester-based company was found to have been trading as insolvency practitioners despite none of its staff being licensed to do so.
Advertised as an alternative solution to standard insolvency proceedings, Save Consultants promised to allow directors to sell their companies and leave their debts behind. Their website claimed that they had helped hundreds of UK company directors.
After an investigation by the Insolvency Service, however, Save Consultants refused to explain their business dealings, and quickly found themselves wound up at Manchester High Court.
“Robust action” taken against them
Dave Usher, chief investigator at the Insolvency Service, explained that Save Consultants “were offering the services of an insolvency practitioner without the authority to do so. No current or former directors are licensed insolvency practitioners, and no evidence was given of a licensed insolvency practitioner acting on behalf of the company.
“The company and its directors failed to co-operate with our investigations and provide any explanation for their business dealings which is why we have taken this robust action to prevent them from trading in the future”.
The Insolvency Service haven’t provided any details of businesses that had used Save Consultants, but the concern is that once they had been bought by the rogue company, their creditors may not have been properly paid.
A previous problem
Sadly, this isn’t the first time that such a case has occurred, and unlicensed insolvency practitioners have been caught before. RKAL were shut down in 2018 after being found to offer a similar service. The resultant investigation into this business showed that they had been charging clients £5,000 to acquire the company from them. After this, no creditors were paid, and it’s unclear what happened to the business afterwards.
Unfortunately for the insolvency industry, there are still many unscrupulous companies looking to take advantage of directors when they’re at their most vulnerable. Company owners should always be wary of liquidation services that seem a lot cheaper than most others. Often, these contain hidden costs that can become a problematic further into the process.
More common issues
If such companies aren’t charging similar prices as their peers, you can often assume that they are looking to make up this money elsewhere in the procedure. This usually comes in the form of any outstanding director’s loans. Once a client has been tempted by the promise of a cheap liquidation, the insolvency firm, acting on behalf of the company, then collects any outstanding director’s loans from business owners. As you might expect, this can often amount to much more than the original saving made by looking for a cheaper deal.
At Forbes Burton, we always look to protect our clients by choosing the best possible solution for them. In fact, if we can save your business instead, we’ll work with directors to ensure they can stay afloat. We also partner with some of the best licensed insolvency practitioners in the industry to provide piece of mind to those that need liquidations and other services.
Cheap insolvency services continue to trade, but business owners would be well-advised to educate themselves on the potential complications in using them. The last thing that most directors need during such a stressful period is the emergence of more problems along the way.
Let us ease the stress
We specialise in helping business owners to navigate their way when their business is struggling. Whether your business can recover from its current issues, or you need to formally close your company down, our experienced team can help.
Call us on 0800 975 0380, or email [email protected] for a free consultation.
