North East Connected

North East Insolvency Expert Warns Region’s Struggling Firms Of Winding-Up Law Changes

The North East chair of insolvency and restructuring trade body R3 is recommending that the region’s company directors seek advice if their business is distressed, following a change in the winding-up petition threshold.

Companies can now face a winding-up petition for debts of £750, after temporary legislation which had previously set the winding-up petition threshold at £10,000 expired.

And Chris Ferguson is warning that the change could result in distressed North East firms facing action from their creditors if they haven’t already come to an agreement about managing their debts.

Chris Ferguson, who is also head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “Now, more than ever, it’s crucial that company directors seek advice if they’re worried about their businesses or concerned about their ability to pay staff, landlords or suppliers – if they don’t, they could face the financial, operational and emotional effects of contesting winding-up petitions in court over a debt of just £750.

“Over the last two years we have seen a number of instances where creditors have recognised that that engagement leads to better outcomes than enforcement.

“Many creditors appreciate the climate in which businesses are operating, and are willing to have a conversation about how and when they can be paid, but that needs to take place sooner rather than later.

“Company directors need to have this conversation about the financial situation they’re in, what they owe and who they owe it to with an expert, so they can develop a plan for managing their debts, before creditors resort to legal action to recoup what they are owed.”

Restrictions preventing commercial landlords from issuing winding-up petitions against limited companies for unpaid rent during the pandemic also expired late last month, with Chris Ferguson also urging businesses who are concerned about this to seek advice about their problems.

He continues: “Rent is typically one of the largest expenses for a business, especially in the retail and service sectors, and many directors may have found the amount they owe has increased where the pandemic has affected their ability to trade.

“It will be a while before the business environment returns to pre-pandemic levels, and companies will already have to face the prospect of increased fuel and energy costs affecting both profitability and cashflow, which will make balancing the books a lot harder.

“If you’re worried about your business’ financial position, or you’re having problems paying suppliers, taxes or staff – which is a sign your business is financially distressed – seek advice from a qualified advisor that will outline the potential options open to you for addressing and resolving the situation.

“We know business owners often find it difficult to talk about concerns they may have, but seeking early advice often leads to better outcomes through maximising the restructuring options available to deal with the underlying issues affecting the business.”

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