What are my options?
Many businesses are facing failure as a result of the Covid-19 pandemic and associated lockdowns, but recognizing the likelihood of your business failing is the first step. Many business owners refuse to acknowledge there is a problem and so bury their head in the sand, don't take action and then when the company fails they are left wondering where it all went wrong!
As a director you have a duty to act in the creditors' interests if the business is insolvent. Failure to act properly could leave you open to personal liability. If you are concerned make sure you have read Is My Company Insolvent? page.
You can also request our FREE 80-page PDF guide for worried directors. It answers everything you need to know about insolvency and your duties as a director.
Warning signs of possible business failure?
These are just some of the key signs to look out for:
- You feel under constant pressure
- You see risks escalating for you and your business
- Your business has become insolvent (see our insolvency signs)
- Your customer enquiries have dried up
- There's no buzz about your business anymore
- Your marketing efforts haven’t produced results
- You've made the same mistakes more than once
- Your bills aren't getting paid on time
- You're experiencing a high staff turnover rate
- You've run out of ideas for new products and/or policies
What can you do to prevent business failure?
Once it has reached a critical point there are number of actions you can take.
- Talk to your creditors and try to agree terms, especially HMRC
- Get a time to pay arrangement in place to pay down debt over time
- Refinance if your current lender has onerous repayments
- Talk to insolvency practitioners about a possible insolvency mechanism that can save the business i.e CVA or Administration.
The most important thing to remember is the longer you leave it to take action, the fewer options will be available to you and your business. Typically this is when a creditor, often HMRC, issues a winding up petition. If you don't know what it is, then read our page on what is a winding up petition. In essence a winding up petition, once issued, means that a voluntary liquidation is not possible and a company voluntary arrangement is more difficult and costly. A winding up petition can sometimes be struck out by the court or we can seek an adjournment of the hearing date, pending the preparation of a CVA, but it is best to avoid this! It can be done but there is no guarantee of success.
Please take a look at our technical guide on protecting the company while preparing the CVA. The crucial step in the winding up procedure is when the order is advertised as the bank will then freeze your account and you lose control. If you do allow the business to be wound up by the court then you will have your conduct as a director being investigated by the official receiver. Don't let this happen - Act now!
If the business is viable then it may be a tragic waste of a good business when you could have done a company voluntary arrangement (CVA) allowing you to pay off your debts over time and remain in control of your business. We are experts at the CVA procedure and have done more than any other practitioner.
Read our comprehensive guides to find out more:
Get to grips with your current situation and the procedures you may need to follow with our comprehensive suite of informative guides:
- Warning signs of a struggling business: This page introduces you to the key warning signs that indicate your business is in trouble. You'll also find valuable information on dealing with banks, creditors, account filing/management account, legal action, HR issues and much more.
- Protecting your company while preparing a CVA: This guide covers the things you need to do to avoid receiving a winding up order, losing control of the company (including your business accounts) and an investigation into your conduct.
- What is a winding up petition?: This page provides an outline of winding up petitions and why you should do your best to avoid one. A winding up petition doesn't necessarily mark the end, but it can make it significantly harder to rescue your company.
There is a saying that "you are where you are!" but it might be worth reflecting on the reasons for failure if you want to set up another venture.
The most common causes of business failure are the following
- Poor financial management
- Extending too much credit
- Growing too quickly
- Unexpected costs
- Sudden change in business environment
- Bad luck
- Theft and fraud ( this is common and happens when the first one on the list is true)
Look what some of our customers have said on our testimonials page. In the meantime, take a look at a letter from one happy client.
This is a short note to say thank you to you and your excellent team for helping us achieve a CVA. The service that you provide is, frankly, unbelievable! Having realised that our company was in trouble, it took me some time to work out that we needed help ... fast. A Google search for Company in Trouble brought up www.companyrescue.co.uk and, having clicked on the link, I ended up on your website. The information on your website is informative, helpful and comprehensive. It was with some trepidation that I decided to call having reached one of the lowest points.
My first call was with Philippa (Samaritan!). Philippa made me feel that there was hope, that it wasn't all my fault (even though I knew that some of it was!) and that, by careful management there might be a way out. Next Hugh (Counsellor!) came to visit and, having spent several hours listening to my problems and assessing whether there was a real prospect of recovery, he recommended that a CVA would be appropriate. Ian (Master!) prepared a proposal to support our company through and into the process of a CVA. At first I felt that we had no option if we were to survive (and we didn't!), but very quickly I realised that a CVA is a good thing. The CVA enables us to re-structure, to re-think and to put together a plan for long term survival that should, if followed well, make us a much stronger and more profitable company than ever before. I didn't come to this conclusion alone though firstly there was Annette (Saint!!) who tirelessly and patiently guided me through the process. Annette gave advice, support and sometimes humour throughout the entire process and never once got bored of me asking the same question over and over, or worrying her with my woes. Annette helped me through every step of the way and was at all times ... brilliant! Finally, of course, there is yourself, Keith (King!). Your advice and support and your expert knowledge cannot, I am sure, be paralleled. It is only through your support and knowledge that we would ever have got this far.
We would never, ever have got through the last few months without the knowledge, support and guidance that KSA Group provides. Your fees are incredibly reasonable for the service that you provide and the knowledge and expertise second to none. Thank you to all of your team for being so brilliant!
If every you have anyone who wants to talk to a reference client, maybe someone who wants to know what to expect from you, or just a plain old reference, come to me I will have no hesitation what-so-ever in recommending KSA Group as the best service for companies needing help ... anywhere!
Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.