In today’s volatile economic climate, companies across industries are navigating increasing financial pressure. Rising interest rates, supply chain disruptions, and margin erosion are converging to place directors and business advisors under heightened scrutiny. Now, more than ever, proactive advice from a licensed insolvency practitioner (LIP) can be the difference between a successful turnaround and a forced wind-up.
Whether you’re a director, accountant, or legal advisor, understanding when and why to involve an insolvency professional is vital to protecting your client's (or your own) business, assets, and reputation.
The Power of Proactive Advice
Licensed insolvency practitioners are not just “last resort liquidators.” They are restructuring and risk management specialists trained to assess a business’s position, preserve value, and advise on compliant strategies to avoid insolvency.
Key areas of early-stage support include:
- Restructuring & Turnaround Planning: Helping businesses assess viability and adjust structure, debt arrangements, or trading practices before creditors intervene.
- Security & Risk Review: Advice on protecting personal and company assets, including the appropriate use of the Personal Property Securities Register (PPSR) and other safeguards.
- Creditor Negotiations & Debt Collection: Guidance on engaging with secured and unsecured creditors, and recovering outstanding debts without escalating disputes.
- Governance & Director Conduct: Clarity on director duties during financial distress, helping reduce the risk of claims for reckless trading, voidable transactions, or breach of duties.
Recognising the Warning Signs
Accountants and legal advisors are often the first to spot financial red flags in a client’s business. These may include:
- Poor cash flow or consistently overdue creditors
- Inability to meet tax obligations (GST, PAYE, income tax)
- Increasing reliance on informal overdrafts or shareholder loans
- Loss of key customers or declining margins
- Poor internal reporting or forecasting
These indicators do not always mean the business is doomed—but they do call for professional triage.
Directors: What You Do Next Matters
One of the most common (and costly) mistakes directors make is waiting too long to seek help. In many cases, companies that could have been saved fall into formal insolvency because directors fail to act or take missteps trying to trade through.
Avoid these common missteps:
- Continuing to trade while insolvent
- Repaying related parties ahead of other creditors
- Selling assets below market value without proper advice
- Ignoring statutory demands or IRD notices
- Failing to record key decisions or seek professional guidance
A timely consultation with a LIP helps ensure that decisions are defensible and compliant, protecting directors from personal liability.
When Should You Call a Licensed Insolvency Practitioner?
If you're advising a business showing signs of distress, or you're a director facing growing uncertainty, don’t wait for a formal insolvency trigger. A confidential, no-obligation conversation with a LIP can offer clarity and practical options—often before formal appointments are needed.
Even when a formal insolvency process becomes necessary, early involvement enables a more orderly, cost-effective resolution—whether that’s a voluntary administration, compromise with creditors, or liquidation.
Final Thought
Engaging a licensed insolvency practitioner isn’t a sign of failure. It’s a sign of leadership, responsibility, and good governance. Whether your client needs help with restructuring, securing their position, or understanding their duties, LIPs are trusted partners in preserving value and minimising risk.
We invite accountants, legal advisors, and directors to contact us for a confidential discussion. The right advice, at the right time, could protect your business or client—and even turn things around.
Licensed. Independent. Here to help.