Can your business survive company insolvency?
Our short answer is yes. There are many situations where we’re able to use informal business recovery strategies or a more formal insolvency process to recover a business from company insolvency.
The options for your business will depend on your individual set of circumstances. But the one piece of advice we give to every company director or business owner is to act on the first signs of company insolvency. A licensed insolvency practitioner can help you from the very beginning, with advice and guidance that could quickly make a positive impact.
Common signs of company insolvency – and how we can help.
Constant reliance on the company’s overdraft
An overdraft is a short-term finance facility. If you’re relying on it to finance your business on a monthly basis, it’s likely that your cash flow is in trouble. You also have to consider what would happen if this facility was taken away. How would your company survive?
The advice of a licensed insolvency practitioner at this stage could mean that you can solve your company insolvency issues without the need for any formal, legal action.
We’ll take the time to look at every element of your business with you, to see what’s working (and what’s not) and to assess the role each part plays in your company’s future. It might be that by making a few changes, you can quickly improve your finances.
Our Kitchen Table Guide talks you through our method, step-by-step. You can download it here.
Being placed on stop by a supplier
This step can be taken by suppliers who have been waiting longer than expected to be paid. Unfortunately, this can often have a domino effect. Without the supplies you need, you could have reduced or no stock. In turn this means no customers and no money coming in.
It might be that you’re waiting for a payment yourself before you can pay your suppliers. This might be a situation you find yourself in every so often and is considered normal for lots of businesses. However, you can very easily face company insolvency if this balancing act fails.
An up-to-date cash flow forecast that includes your profit and loss projections will show you what changes you can make to match your incomings and outgoings. It might mean that you need to change your customers’ payment terms or the dates you make certain outgoing payments. A licensed insolvency practitioner can guide you through the changes you need to make and help you put them into action.
Threat of legal action from creditors
This step is usually a last resort for creditors. It’s likely that you’ll have had a number of chances to pay your outstanding debts before this happens. There will also be some warning of this action, such as telephone calls or formal letters requesting that the payments are made.
A County Court Judgement is often the first step in creditor legal action. A Statutory Demand will usually follow. If you’ve received one already you have 21 days to pay the creditor in full or further legal action will be taken. The end result in this is your company could be forced into compulsory liquidation by the court. We can step in before company insolvency gets this far.
The first thing we do is look at the most imminent threat to your company and deal with it. We might be able to approach your creditors with a repayment proposal, based on a realistic business plan and proof of your ability to pay off your debts. Many people find this kind of negotiation stressful or even embarrassing, which is why we can guide you through and even act on your behalf.
Alternatively, a Company Voluntary Arrangement (CVA) is the legal form of this creditor negotiation. Essentially it puts a barrier between you and your creditors, and puts in place a formal agreement for you to repay some or all of your debts. A licensed insolvency practitioner has to oversee this process, so we’ll do all the legwork for you.
In some situations, we can consider a company administration or a Creditors’ Voluntary Liquidation (CVL) to save your business by moving it to a new company, with the same company directors and business owners but free of the historic debt.
Once we have a clear understanding of your situation, we’ll be able to advise you on the best way forward.
Unable to meet tax obligations
HMRC are typically the main creditors for a company. They’re also the most likely to take legal action if they are not paid. If you’ve ignored VAT or PAYE bills because you can’t afford to pay all your creditors on time, it might be that you’re facing company insolvency.
Keeping HMRC informed if you cannot make payments is better than ignoring them and hoping they forget about you. HMRC have a Time to Pay team whose role it is to negotiate agreements with businesses to help them pay their missed bills over a set period of time.
We can work with you to create a proposal for HMRC, mapping out your plan for repayments and showing them how you plan to get your business back on track. The more detailed this plan is, the more likely it is to be approved, which is why it’s vital to seek professional help before you go to HMRC.
Bailiff action being taken
If you’re struggling to keep up with debt repayments or have failed to pay debts you owe then bailiff action may be threatened. A bailiff has legal power to collect certain debts either by requesting the payment in cash or by taking and selling belongings to raise the money. This action is generally only taken if creditors have tried other ways to get their debt paid.
If you receive notice from a bailiff, do not ignore it. There are options to stop bailiff action if the notice is acted upon quickly. Please call us as soon as possible so that we can take immediate action to help you.
Other ways we can help