Artificial intelligence can be useful for many things. It can help draft emails, explain basic concepts and provide general information. However, when it comes to insolvency advice, directors should be extremely careful.
Insolvency is a specialist area of law and practice. The consequences of getting it wrong can be serious for the company, its creditors and the directors personally.
Molly Monks F.I.P.A of Parker Walsh, a licensed Insolvency Practitioner, regularly advises directors who are under pressure from HMRC, suppliers, lenders and other creditors. Her view is simple: AI may be helpful as a starting point for general understanding, but it should never replace advice from a qualified, regulated and experienced insolvency professional.
A licensed Insolvency Practitioner does not qualify by simply reading articles online or repeating general information.
Molly Monks F.I.P.A of Parker Walsh revised for and sat the specialist insolvency examinations required to become JIEB qualified. The Joint Insolvency Examination Board qualification is widely recognised within the insolvency profession and is a key part of the route to becoming licensed.
Molly also holds a yearly licence from the IPA, the Insolvency Practitioners Association. That licence is not a one-off achievement. It must be maintained and is subject to ongoing professional requirements.
As part of that, Molly completes a minimum of 26 hours of specific continuing professional education each year. This helps ensure that her knowledge remains current and that the advice she gives reflects developments in insolvency legislation, regulation, case law and professional practice.
AI does not sit exams. AI does not hold a licence. AI does not complete annual insolvency-specific training. AI is not regulated by the IPA and it does not carry professional responsibility for the advice it provides.
Every company is different.
Two companies may both owe HMRC money, but the advice could be completely different depending on the facts. One company may still be viable and able to propose a Time to Pay arrangement. Another may need to consider a Company Voluntary Arrangement. Another may have stopped trading and need advice on liquidation, dissolution or director duties.
AI does not know the full background unless it is given every relevant fact. Even then, it may not ask the right questions.
Proper insolvency advice requires a review of the company's financial position, creditor pressure, assets, liabilities, trading history, cash flow, director conduct and future prospects. Without that information, any answer is only general and may be unsuitable.
One of the biggest risks with AI is that it can sound very confident.
It may provide an answer that appears clear, polished and reassuring, but that does not mean the answer is correct. AI can make up rules, misunderstand legal processes, overlook important exceptions or apply information from the wrong country.
That is particularly dangerous in insolvency. Directors may rely on an answer that tells them what they want to hear, only to find later that the position was more serious than they realised.
Insolvency advice should not simply be comforting. It should be accurate, practical and based on the real position.
When directors are worried, it is natural to look for reassurance.
A director may want to hear that they can continue trading, that HMRC will accept a repayment plan, that an overdrawn directors' loan account will disappear, that redundancy money is guaranteed, or that liquidation will solve every problem.
AI may produce an answer that seems to support that hope. Sorry, but that does not make it true.
A licensed Insolvency Practitioner has a duty to give proper advice, even when that advice is difficult to hear. At Parker Walsh, we would rather give directors an honest explanation at the start than allow them to make decisions based on false comfort.
Liquidation, administration, Company Voluntary Arrangements and other insolvency procedures are formal legal processes.
A licensed Insolvency Practitioner is regulated and must comply with professional standards, insolvency legislation and ethical duties. They are required to consider the interests of creditors, review the company's affairs and, where appropriate, report on director conduct to the Insolvency Service, which is a government body.
AI does not hold a licence. It does not carry professional responsibility for the advice it gives. It cannot act as an Insolvency Practitioner. It cannot properly assess director conduct, deal with creditors, prepare formal proposals or carry out statutory duties.
That matters because insolvency decisions can have real consequences.
When a company is insolvent or close to insolvency, directors must act carefully.
Continuing to trade, paying certain creditors, taking money from the company, selling assets, ignoring HMRC, using customer deposits or delaying decisions can all create risk if handled incorrectly.
AI may give general guidance, but it will not always identify the practical risks that apply to a particular director. It may also fail to explain what evidence should be kept, what steps should be avoided and when professional advice should be taken immediately.
A director who relies on poor advice could make the position worse without realising it.
Many directors use AI because they want to understand whether there is a way to avoid liquidation.
There may be. Depending on the circumstances, options could include informal creditor negotiations, a Time to Pay arrangement with HMRC, refinancing, restructuring, a Company Voluntary Arrangement, administration, dissolution or liquidation.
However, knowing that an option exists is not the same as knowing whether it is suitable.
For example, an HMRC Time to Pay proposal needs to be realistic and supported by the company's financial position. A CVA needs to be properly prepared and capable of creditor approval. Liquidation needs to be explained carefully so directors understand the consequences.
AI cannot take conduct of the matter, negotiate directly with creditors or stand behind the advice.
AI can be useful for basic education. It may help a director understand common terms such as liquidation, insolvency, CVA, administration, director duties or HMRC Time to Pay.
However, it should not be used to make final decisions.
If the company is receiving demands from HMRC, facing creditor pressure, unable to pay debts, considering liquidation or worried about director liability, professional advice should be taken as soon as possible.
The earlier advice is taken, the more options may be available.
Molly Monks F.I.P.A of Parker Walsh is a licensed Insolvency Practitioner, JIEB qualified and licensed by the IPA. She undertakes a minimum of 26 hours of insolvency-specific continuing professional education each year and provides clear, confidential and practical advice to directors facing financial difficulty.
At Parker Walsh, we do not simply tell directors what they want to hear. We explain the real position, the available options and the consequences of each route.
AI can provide words on a screen. A licensed Insolvency Practitioner can provide regulated advice based on your actual circumstances.
If your company is struggling, speak to Parker Walsh before relying on online answers or making decisions that could affect you personally.
No, AI can only provide general information and cannot assess your company's full financial position, so it should not be relied on for actual insolvency advice.
A licensed Insolvency Practitioner must be JIEB qualified, hold a yearly licence from the IPA, and complete a minimum of 26 hours of insolvency-specific continuing professional education each year.
Insolvency procedures are formal legal processes with real consequences for creditors and directors, so practitioners must meet professional standards and legal duties that unregulated sources like AI cannot fulfil.
Directors can become personally exposed if they continue trading, pay certain creditors, or delay decisions incorrectly, potentially worsening the company's position without realising it.
Directors should seek advice as soon as they face HMRC demands, creditor pressure, cash flow problems, or concerns about liquidation, since earlier advice generally means more options are available.
I am Molly Monks, a licensed insolvency practitioner at Parker Walsh. I have over 20 years of experience helping directors with the financial struggles they may face. I understand that it can be overwhelming and stressful, so I offer practical straightforward advice, which is also free and confidential. I spend time with directors to get a good understanding of their business and their goals, therefore providing the best tailored advice possible.
Email: molly@parkerwalsh.co.uk
Phone: 0161 546 8143
WhatsApp: 07822 012199
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