0800 9700539
Show Menu

Business insolvent? A guide to your options

Falling behind with tax payments or dealing with aggressive creditors can be stressful and worrying, especially if you’re unsure what do to next. Becoming insolvent doesn’t mean the business should close down – there are still ways to turn things around.

Understanding the options available to you can help relieve some of the pressure and give you a chance to consider all outcomes for the business. Take a look below:

Trading out

This is a common way of handling financial problems if the business is viable and is suffering in the short term. Even the largest companies that fall in to cash flow difficulty can be helped by securing extra finance or restructuring. 

Take notes of every decision, meeting and correspondence with creditors and if negotiating prices, have a well-thought and realistic plan in place. Work on daily cash flow and reduce any non-essential costs to save money.
 
As well as cutting costs, it may be worth looking into alternative finance to improve working capital – however, be careful. It’s bad practice for a business to rely on regular loans or funding to keep going. A more formal insolvency approach may be needed to support the business.

Time to pay (TTP)

A time to pay arrangement with creditors (like HMRC) allows the business to pay back debt, for instance VAT, PAYE or Corporation Tax, over a set period of time. This kind of deal can ease pressure while the business continues trading. View our TTP page for more information. Email robertm@ksagroup.co.uk if you would like a free pack of templates and guides to assist your application. 

Company voluntary arrangement (CVA)

This is a formal deal between the company and its creditors whereby a proportion of debt is paid back usually over three to five years. Often the return is seen as ‘x’p in the pound with some debt written off. The director(s) continue to run the business during the CVA. 

We have helped a number of companies across all industries enter a CVA – see our case studies page for some examples. 

Administration and pre-pack administration

If legal action is looming, appointing an administrator to put the company into this procedure will protect the business and its assets. Once administrators take over the company, they will look at all possible options for the business to repay creditors.

If the business is viable, it may be possible to exit into a CVA once legal action or creditor pressure has stopped. Alternatively, administrators may find the best solution is to sell the business and assets to raise money for creditors.   

Pre-pack administration

This is where the business is sold to a third party of new company (newco) upon the appointment of administrators. Jobs can be transferred over and the business can continue trading.

Creditors voluntary liquidation (CVL)

Considered as a last resort, this procedure involves a liquidator selling the business and assets, then equally dividing proceeds (if any) between creditors. Sometimes the business may no longer be viable or the director wants to close it down and move on. It’s called creditors voluntary liquidation because only creditors can appoint a liquidator to wind the company down. Directors can initiate proceedings by calling a meeting with creditors and going from there.

Free consultation

Directors should always act to maximise creditors’ best interests. Failing to do so could result in personal liability or disqualification.  If in doubt on what to do, seek advice and ensure records and accounts are clear and up to date. Call us on 0800 9700539 if you would like to talk through the options for a particular situation. 

Browse our expert guides on CVAs, directors duties and warning signs of an insolvent company. 

0 Comments

Post a Comment

Many thanks for your comments. If you have a private business problem and you want advice give us a call on 0800 9700 539 or email me at keiths@companyrescue.co.uk. If you are a professional advisor with a troubled client, please suggest they visit www.companyrescue.co.uk or contact me as above.


No Very





Captcha Image



DISCLAIMER

The information contained in this Blog (the "Blog") is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in information contained in this Blog. Accordingly, the information on this Blog is provided with the understanding that the authors and publishers are not herein engaged in rendering professional advice or services. As such, it should not be used as a substitute for consultation with professional and competent advisers. Before making any decision or taking any action, you should consult a professional adviser. 

While we have made every attempt to ensure that the information contained in this Blog has been obtained from reliable sources, KSA Group is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this Blog is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Nothing herein shall to any extent substitute for the independent investigations and the sound technical and business judgment of the reader. In no event will KSA Group, or its directors, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Blog or for any consequential, special or similar damages, even if advised of the possibility of such damages. 

Links to Related Internet Sites 

Certain links in this Blog connect to third party web sites. KSA Group does not accept any responsibility for, nor makes any representations as to the accuracy of, any content in such third party web sites. 

Third Party Comments 

Third parties may submit comments for publication on the Blog. Any such comments are submitted on the basis that KSA Group will review and may edit such comments, and that not all submissions will be published. Any third party comments published on the Blog (whether edited or not) are third party information for which KSA Group takes no responsibility and disclaims all liability, and the above disclaimer applies to any such third party comments. 

Privacy Statement 

If and to the extent that you submit any personal data (such as your name and email address) to KSA Group through this Blog, including by email to the Blog manager, KSA Group (as data controller) confirms that it will only use any such personal data for the purposes for which you have provided such data. 

Copyright 

The copyright in the text, podcasts, PowerPoint slides, layout and any other materials on this Blog (other than any third party comments) is owned by KSA Group Ltd. All rights are reserved. 
If you wish to use or copy any of the text or other materials on this Blog (or any extracts from the same), you must first contact KSA Group for copyright permission in relation to the proposed use. In addition, any use of text or other materials on this Blog (or any extracts from the same) in published materials must identify the KSA Group materials involved and reference the KSA Group author's name. 

The browser you are using is Explorer 8 and this site is not compatible with this version. Please upgrade or switch, which is free, for a more secure and better browsing experience.Close