Trading with an insolvent entity
As mentioned in the previous sections, the practitioner appointed may keep the business running in order to try and sell the business as a going concern or to realise best value for the business's assets.
In order to keep the business trading it is usually necessary to procure new supplies. This usually involves approaching existing suppliers.
Whether the supplier wishes to continue to supply the entity comes down to a commercial decision. Payments from insolvency practitioners when trading businesses are not guaranteed but have priority over other expenses of the process including the practitioners' fees. Usually a practitioner will only commit to making payments if they are sure that there will be sufficient funds from trading or selling assets to meet this payment.
If a supplier is willing to continue to trade with the insolvent entity then usually they will be asked to confirm the terms of trade. Usually a practitioner will require a credit period and the terms of this would have to be agreed. There would normally be other standard terms of trade including contracting out of any personal liability.
When trading with a business in an insolvency procedure the key is to ensure that all orders have been signed by an authorised signatory of the practitioners concerned. Usually a letter signed by the appointed practitioner will contain details of who is authorised to commit the company to making payments. Any document authorising an order (as well as normal documentation such as proof of delivery, etc.) should be kept in a safe place as without it obtaining payment may be difficult.
