BusinessBusiness RecoverySmooth insolvency: try to see it my way

Smooth insolvency: try to see it my way

The relationship between insolvency practitioner and solicitor is vital if the insolvency process is to procede smoothly, says Barry Lewis, and key to this is is clear communication

The relationship between insolvency practitioner and solicitor is one of the
most vital tools in the insolvency process.

Making sure that recoveries for the benefit of creditors are maximised ­ in a
cost-effective, practical and proactive way ­ is fundamental to that process.

So an effective rapport between IP and solicitor ­ working together on the
same team, but bringing very different perspectives to the job in hand ­ can
ultimately lead to a wider scope of possibilities for recovery.

Unfortunately, all too often the relationship can become clouded by
ineffectual communication between the two parties. Look a little deeper, and it
becomes clear that this communication breakdown frequently results from a lack
of understanding of what either party wants.

Of course, it is important to remember that every case is different,
presenting its own unique set of circumstances and challenges. Insolvency cases
can require a solicitor to deal with such diverse issues as property, employment
law, overseas or cross-border matters and contracts for sale of assets.

So it is clear that the solicitor and their team have an all-round knowledge,
not only of insolvency law as it applies to both individuals and corporate, but
also on peripheral matters such as retention of title, landlord and tenant
issues and various Companies Act requirements.

As a result of these potential complications, inherent within each insolvency
case is the possibility for a whole range of commercial legal issues to crop up
and be dealt with at any time. This in itself places a considerable strain on
the relationship between the IP and the solicitor.

So what can be done to build bridges between IPs and solicitors? Experience
suggests that there are a number of commonsense steps that can make a real
difference to the working relationship.

Communication clearly comes first. Constant communication between the IP and
solicitor is of paramount importance: equally important is the communication of
practical, timely and concise advice.

The key to bringing about a quick resolution is to act swiftly and to cut out
unnecessary tasks wherever possible. IPs will certainly appreciate brief,
to-the-point correspondence rather than lengthy formal letters.

Secondly, it is important that all parties remember that the IP and the
solicitor are on the same side. Regrettably, it is often the case that, while
implementing a formal insolvency procedure, the IP can often come under attack
from a number of parties.

For example, the IP may often find themselves in the firing line as though
they were a director of the firm. Accusations of selling stock at under-value is
one all-too familiar reason for this kind of difficulty.

So in addition to the statutory protection here, clear support of an IP’s
chosen course of action is required from the solicitor. With both solicitor and
IP making it clear that they are presenting a united front, they are better able
to work from a position of strength.

Equally important as protection from third parties, is the solicitor’s
responsibility to keep the IP focused on the commercial merits of the case.

For example, it is not uncommon for a director to have misappropriated
company assets during the period prior to the formal insolvency appointment . A
subsequently appointed IP can then instigate recovery proceedings against the
director for the return of the assets, which in turn would enable a dividend to
be paid to creditors.

An IP following a course of action that is arguably leading to a dead end can
prove to be financially beneficial to the solicitor.

Finally, the demonstration on the part of the solicitor of their willingness
to share some of the risk can invaluably strengthen their relationship with
their IP. Where cases that are not fully funded are concerned, consideration
does need to be given to conditional fee agreement, or CFA, a form of retainer
that states that payment of a percentage of the solicitor’s rates is conditional
on the success of the litigation.

The relationship between IP and solicitor can be best summarised through the
immortal words of Lennon and McCartney, with both parties getting the other to
‘try to see it my way’.

With each party giving adequate consideration to the requirements of the
other, and an appropriate amount of flexibility being given, there may indeed be
an increased possibility that ‘we can work it out’.

Barry Lewis is a partner and licensed IP at
Harris Lipman

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