Helping directors online for over 23 years.
In the aftermarth of the Covid-19 Pandemic, and its associated lockdowns, there is a real danger that many businesses will go under. This is especially the case as support has now been withdrawn in the form of furlough and loans. In addition HMRC have started to collect in debts racked up during the pandemic. So how can you stop your business going under?
If your business is struggling then it may actually be insolvent. See these insolvency tests to check if this applies to you. If your company is insolvent then your directors duties change from maximising returns to shareholders to ensuring that you act in the best interest of ALL creditors. This means not making the situation worse, moving assets or paying some creditors before others. To demonstrate this the most important thing to do is to ACT. Consult a turnaround or insolvency practitioner ( initial meetings are free ). If creditors are pressing to be paid and starting legal action and you fail to act then you do run the risk of personal liability, wrongful trading or even misfeasance. This is especially the case if your actions/inaction can be shown to be making the situation worse.
I have heard about CVAs – what are they and how do they work?
If you want to save your business from going under then we can help. However, you must not underestimate how much discipline you will need to do this. A Company Voluntary Arrangement or CVA allows the directors to stay in control and pay off creditors over time. The CVA protects the company against unsecured creditors from taking action against the company. Secured creditors, most usually the bank, will need to be convinced that the business will succeed and their position is not compromised. This is where we come in. We have an excellent record ensuring that the banks stay on board. In addition we can persuade HMRC, who are a preferential creditor, that the business is viable and that they should support the company’s restructuring plan.
In order for a company voluntary arrangement to work the directors need to be absolutely focused on saving the business. This means that they will need to have a daily cashflow model, costs will need to be cut dramatically, and very importantly the directors must have a realistic view of potential future sales. Part of a preparation of a CVA is to put together financial forecasts for the business. Our finance team can help in putting this together.
Read our full guide on CVAs here
The main reason why this process is not used so much, is that there is much ignorance and prejudice around the process. We have a page called CVA worries that seeks to challenge these misconceptions.
If you have read the case studies and the CVA worries page then please call us on 08009700539