What to do if your agency hits trouble

If your agency is trading as a limited company, do you have to wait for the bailiffs to arrive?  Not necessarily. Today, we are repeating the second part of our mini-series on insolvency as many readers could not get the link to work on Friday.


If your agency is trading as a limited company, then there are two types of insolvency that you can consider – voluntary and compulsory.

You would only get to this stage after considerable pain: you have no business coming in, and your debts have mounted. You are possibly trading insolvently.

An insolvency expert has two ways of checking this: one definition of trading insolvently is being unable to pay debts when they fall due. The other is an audit of the balance sheet to see if it shows that the company has more liabilities than assets.

As mentioned in Wednesday’s opening article in this series, liquidators do charge for their services. They look to be paid either by the directors or, more likely, by selling off the assets of the company, by rescuing at least part of the business or by being able to collect money in the pipeline that is owed to the agents.

The problem for many agents is that they have very little in the way of assets: their office is leased, their cars have lost value, and their equipment consists of office furniture and computers.

“In such cases, the assets may not even cover the cost of liquidation,” says insolvency practitioner Catherine Matthews, a partner in Tomlinsons.

So, the big question for the liquidators is if any part of the agency business can be rescued. For example, could four branches come down to one? Could sales go but letting and management remain?

We are, incidentally, seeing such rescue strategies taking place at several estate agencies. Typically, a number of branches and jobs are lost, but better-performing parts of the business are kept and put up for sale.

If the business is in such a state that rescue is not viable and it is not possible to pay the liquidator, then compulsory liquidation is the other option.

This is usually triggered when a creditor acts to wind up the company in an attempt to get at least some payment. The Official Receiver is then appointed. For many agents, this seems the worst possible scenario. However, to others it can come almost as a relief, knowing that your affairs are now being dealt with on your behalf.

However, liquidation, whether voluntary or compulsory, is not the only option for agents trading as limited companies, as we shall see in the next in this mini series.