Oliver Elliot

How are an Insolvency Practitioner's fees calculated?

An Insolvency Practitioner's remuneration is approved on one or more of the following bases:

• ⏱️ Time properly spent on the case.
• 💷 A fixed fee.
• 📊 A percentage of the assets realised and/or distributed.

In most cases, the basis of remuneration must be approved by creditors, a creditors' committee or, in some circumstances, the court. Detailed fee information must also be provided so creditors can understand exactly what work has been carried out.

The process is designed to balance fair remuneration with accountability.

What happens to an overdrawn director’s loan account when a company goes into liquidation?

A common misconception is that liquidation wipes away everything.

If a director owes money to the company through an overdrawn director’s loan account, the liquidator must investigate it and consider whether repayment should be sought.

This could involve:
✅ Reviewing how the account became overdrawn
✅ Requesting repayment from the director
✅ Agreeing a settlement where appropriate
✅ Taking further action if repayment is not made

A liquidation deals with company debts, but it does not remove assets owed to the company. A director’s loan account is one of those assets.

Does HMRC stop companies closing down?

It's one of the most common misconceptions we hear.

The short answer is no, but it depends on how you're trying to close the company.

If your company owes HMRC money, they can object to a voluntary strike off application. That doesn't mean the company is trapped forever. It simply means a strike off may not be the appropriate route.

For many insolvent companies, a Creditors' Voluntary Liquidation (CVL) provides the proper legal process to close the business and deal with outstanding debts.

Ignoring HMRC rarely makes the problem disappear.

If you're unsure which option is right for your company, taking advice early usually gives you more choices.

Can you sell your insolvent company debts?

The answer is: it depends.

A sale of an insolvent company can perhaps potentially be perfectly legitimate if it's carried out properly and in the interests of creditors. But if the real objective is simply to walk away from the debts while retaining the value, you could be inviting serious legal and financial consequences.

Every situation is different, and getting the structure wrong can be far more expensive than getting advice first.

"You can sell your insolvent company... and keep all the cash in the bank??" 🚩🚩🚩🚩

It is the sort of offer that amounts to a breach of duty conceivably.

If a company is insolvent, the cash at bank is not simply a bonus for the outgoing director. Transactions entered into before insolvency are open to scrutiny, and if creditors lose out, the consequences can fall back on those who approved the deal.

Before signing anything, get independent insolvency advice. A "too good to be true" offer usually is.

Failure to file company accounts is a criminal offence.

It isn't simply an administrative oversight or a deadline you can keep nudging into tomorrow. Directors have a legal duty to ensure accounts are filed on time.

Missing filing deadlines can lead to financial penalties, prosecution in some cases, and can even become a factor when a director's conduct is reviewed if the company later enters insolvency.

Running a company comes with responsibilities as well as rewards.

Who's responsible for the company's accounts?

Many directors may well assume it's their accountant.

It isn't.

An accountant can prepare the accounts. A bookkeeper can keep the records. But the legal responsibility for ensuring the company maintains adequate accounting records and files compliant accounts rests with the directors.

Too many people may mistake delegation for absolution.

If you're a company director, understanding your legal responsibilities isn't optional. It's part of the job.

‘I don’t understand the overdrawn director’s loan account, but the accounts were professionally prepared.’

A professional accountant preparing the accounts does not remove a director’s responsibility to understand what they are signing.

The figures may have been prepared by someone else, but the legal responsibility for the company’s affairs still sits with the director.

Understanding what you owe the company matters, especially when that debt could create personal tax consequences or become an issue in a liquidation.

"Can the end justify the means?" Not when you're a company director.

The UK Supreme Court has made it clear: believing you're acting in the company's best interests is not a licence to ignore the rules or sidestep your fellow directors.

Good intentions are no substitute for proper authority. Corporate governance exists for a reason. Funny how the law insists that process matters. Humans keep trying to negotiate with reality as though it accepts amended terms.

Can a director act alone simply because they believe it's in the company's best interests?

The answer is usually no.

A director's duty to promote the success of the company does not override the company's constitution or the need for proper authority. Acting with the noblest intentions can still land a director in difficulty if they ignore the company's articles, board procedures, or shareholder rights. Humans have an endearing habit of confusing "I think I'm right" with "therefore I'm authorised."

Good governance exists for a reason. It protects both the company and its directors.