Energy supplier insolvency is only set to continue
Some energy firms who have already gone bust include Goto Energy, Avro Energy, Green Energy, PFP Energy, Utility Point and more. Many others are facing financial difficulty and we expect to see this domino effect continuing over the coming months.
Insolvency is a complex matter
Energy supplier insolvency is a complex matter. Because a loss of access to gas and electricity could have a significant impact on consumers, there are numerous regulatory processes that exist to ensure that energy is still supplied when an energy supplier fails.
Ofgem takes control of this switchover, finding an alternative Supplier of Last Resort, at which point any credit with the old supplier will be switched over. If Ofgem cannot find an alternative Supplier of Last Resort, the energy company can be placed into Energy Supply Company Administration. This special administrative regime aims to ensure the continued trade of large energy supply companies in financial distress, sometimes with financial assistance from the Government. While this is largely uncommon, it could be something we see more of in the future.
When an energy company becomes insolvent, the directors have numerous statutory duties. What’s more, a director can become personally liable for company debts, and they should take all steps to ensure the position does not get worse.
What are insolvency practitioners and what do they do?
An insolvency practitioner is someone licensed to act on behalf of companies when they are facing financial distress. They can also help directors of solvent companies who have chosen to liquidate their companies via a Members’ Voluntary Liquidation (MVL) in order to extract held profits.
In most cases, energy suppliers will choose their own insolvency practitioner. But when compulsory liquidation takes place, the courts appoint an Official Receiver who acts as the provisional liquidator. It may then be requested that an insolvency practitioner is appointed to progress the company liquidation.
An insolvency practitioner will work with you to find out the best course of action, whether that’s turning your business around, closing your company down via creditors voluntary liquidation (where you cannot pay your debts) or a member’s voluntary liquidation (when your company is deemed solvent). They will hold your hand throughout the process, making a highly complex area much easier to navigate.
The difficulties faced by insolvency practitioners
Insolvency practitioners dealing with insolvent energy providers have been criticised by Ofgem for failing to quickly finalise customer bills and collect outstanding monies. However, insolvency practitioners are often brought into a failing company with short notice, and not much knowledge of the business, its systems or its customers. What’s more, records are incomplete, and there can be little support from company directors. We would always recommend companies work with an insolvency practitioner before it gets to compulsory liquidation.
If you’re looking for insolvency practitioners, we can help
At Beacon Licensed Insolvency Practitioners, we work hard to turn your business around. While you might think liquidation is the only option, there are many areas we can explore with you that could be the rescue operation you need. When we can’t find a viable business strategy, we can help you close your business in a legal and clear way, making the whole process as straightforward as possible. If you need help, we’re on standby. To speak to our helpful and knowledgeable insolvency practitioners, please contact us today.