Insolvency applies to businesses as well as individuals – while bankruptcy, is a type of insolvency, applies only to individuals and sole traders – and sees legal action taken against the insolvent entity. Its assets may be liquidated, which basically means they’re sold and turned into cash to pay off outstanding debts to banks and creditors.

Restructuring is a way of helping a client avoid becoming insolvent, and is usually the first stage in agreeing a way forward with creditors to manage repayments. After restructuring, debt repayments become more manageable, making insolvency proceedings less likely.

Lawyers in this field can therefore do non-contentious work (restructuring) or contentious work (insolvency litigation), and roles will vary depending on whether they act for debtors or their creditors.

Why is it important? What does it involve?

Restructuring and insolvency law is important because businesses and individuals depend on it to resolve issues arising from financial distress.

It’s arguably become even more vital in recent years: Covid-19 has created a boom in this area, for example, with senior partners across the country reporting that they’ve never been busier. In June 2020, the UK government introduced the Corporate Insolvency and Governance Act (CIGA) and with it, new measures to help companies in financial turmoil due to the pandemic. Businesses now have more space and time to restructure by placing a stay on creditors' rights, for example: more work for restructuring lawyers.

Some of the measures introduced by the CIGA were extended to the end of September 2021, but now they’ve ended a corresponding uptick in insolvencies can be expected: more work for insolvency lawyers.

Brexit is another factor that’s impacted this area of law and increased its importance. As international trading continues to be challenging for UK businesses, as well as the impact of the pandemic, many smaller businesses are thought to be at heightened risk of bankruptcy.

Restructuring lawyers might be acting for either debtors or creditors, negotiating agreements and repayment schedules to enable the creditor to pay off the debt without becoming insolvent.

Insolvency lawyers also might be acting for either debtors or creditors, but they are engaged in all stages of the insolvency process, from negotiating voluntary arrangements, to administration and receivership. They are also involved in the liquidation stage.

The specifics of the work varies from firm to firm. Large City firms, for example, usually deal with big corporate restructurings / insolvencies and the representation of creditor groups. Meanwhile, smaller regional firms mainly work on smaller corporate and personal insolvency cases.

One thing is usually the case across all variables: when financial difficulties arise in companies, speed is key. The legal team engaged needs to move swiftly to provide immediate assistance. This area of law is extremely fast-paced and lawyers are often asked to deliver solutions overnight, so those able to cope with that pace will thrive in this area.

Insolvency and restructuring also involves plenty of paperwork, so lawyers must be organised and able to prioritise workloads, as well as having top notch attention to detail.

Break it down for me a little bit!

Having an interest in business and finance is a prerequisite for this area of law, as is a high level of commercial law. An ability to keep a cool head is also handy – restructuring and insolvency situations are tense for both debtors and creditors – as well as strong communication skills, for negotiating and litigating on your client’s behalf or working with other professionals involved, such as liquidators and accountants.

This is also an academically demanding area of law, covering many different fields such as banking, commercial and litigation: a knack for absorbing large volumes of paperwork and making quick, accurate decisions is a must.

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