Trading Insolvencies

Trading Insolvencies

On occasions, it will be necessary for an insolvency practitioner to continue in trade. This would often have the advantage of preserving the business and to maximise the value of a potential sale on a going concern basis. Short term trading can is required where there are perishable goods, livestock or other stocks.

Generally, a practitioner would wish to avoid trading, he must be compliant with all relevant regulatory and legal obligations and may become personally liable for any breaches.

If a decision is made to trade, then there are many practical considerations to take into account. The practitioner needs to ensure that his staff has sufficient expertise required to run the business. There must be a clear benefit to the creditors from continuing to trade. It would not be in the best interest for say a practitioner to trade a corner shop until it is sold. His staffing costs would be disproportionate to the benefit for creditors.

Trading is more suitable in voluntary arrangements where the debtor / directors remain in charge of the day to day running of the business. This is often a strong selling point to creditors of an IVA as the going concern value of a business can be preserved with minimal cost.