Companies can experience financial challenges for any number of reasons. Burdensome debts accrued over a prolonged period, or a sudden, unexpected debt can lead to your company struggling to repay its liabilities as and when they fall due.
How ever the company gets itself into debt, taking advice as soon as you become aware of the problem can help you achieve a better outcome than if you were to bury your head in the sand and hope the problem will go away on its own.
While it may be tempting to turn to any source of advice that best fits the answers you want to hear, your best option would be to speak to a licensed and regulated insolvency practitioner (IP).
When: If your company is struggling to pay its bills
As a company director, it is part of your directorial duties to be aware of that company’s solvent position. An inability to repay its liabilities as and when they fall due is the main telltale sign of company insolvency. Additionally, you should watch out for:
- Increasing creditor pressure
- Debts to HMRC
- A decrease in profits or a lack of capital to support operations or growth
Why: Regulated, Accountable, and Professional Advice
All processes previously mentioned are formal and legally binding and as such, must be carried out by an insolvency practitioner (IP).
IPs are licensed and regulated professionals who are:
- Regulated by professional bodies like the ICAEW
- Held to strict professional standards and regulations as detailed in the Insolvency Act 1986
While admitting that your company is insolvent may feel like defeat, burying your head in the sand and delaying in speaking to an IP can worsen the situation and may further limit the solutions available.
IPs can provide clarity on the complexities and specifics of UK insolvency law, including what your obligations are as the company’s director, what could happen after the company is liquidated, and whether your actions leading up to and during the insolvent period could have consequences.
How an IP could help your company
If your company is insolvent, you should contact a licensed insolvency practitioner. Some may offer free initial advice with no obligation. Once they assess your company’s situation, they will suggest the formal insolvency process best suited to its circumstances. This could include:
- Repaying what the company can afford through a Company Voluntary Arrangement (CVA)
- Restructuring the company through administration
- Closing the company through an insolvent Creditors Voluntary Liquidation (CVL)
While your company undergoes an insolvency process, the IP will manage and oversee formal proceedings; this may include supervising a payment plan or a business’ restructuring, asset management, or distribution of funds to creditors.
Although IPs are mostly associated with insolvency procedures, they can also be engaged to liquidate solvent limited companies if they enter a Members Voluntary Liquidation (MVL). Again, this is a formal, legally binding process and so can only be carried out by an IP.
To summarise
If your company is under financial pressure and is struggling to stay afloat, take the right advice quickly to find the best solution to your company’s problems. Speak to a licensed and regulated insolvency practitioner for professional insight and impartial, confidential advice. Depending on your company’s situation, they may recommend one of several formal debt recovery or closure procedures.