The first steps to take if you are concerned about your company’s financial position
The sooner advice is taken, the better the likely outcome
Financial difficulties can very quickly lead to insolvency, which arises when a company has insufficient assets to cover its liabilities (debts), or is unable to pay its debts when they fall due. There are a number of different options for dealing with financial difficulties, ranging from debt consolidation and informal arrangements with creditors to formal/statutory insolvency procedures. With many companies likely to be in difficult financial positions due to Covid-19, our advice as insolvency practitioners is that the sooner the problems are addressed with accountants and/or insolvency practitioners, the better the likely outcome.
Available solutions fall into two broad categories
- Informal options: These are solutions which may not affect company assets (the things the company owns), and can be put in place by directors, and/or with the help of an advisor. Informal options usually involve finding a new source of funding, or reaching a negotiated agreement with key creditors (the people and companies the company in distress owes money to). However, creditors cannot be forced into accepting an informal solution and entering one does not prevent dissenting creditors, or other creditors who were not part of the agreement, from taking separate legal action to seek repayment.
- Formal options/statutory insolvency arrangements: These procedures are usually required when a company’s financial position reaches a point where its liabilities exceeds its assets, or it is unable to pay its debts as they fall due, meaning the company is insolvent. At this stage it may be necessary or desirable to place it into an insolvency process. Some insolvency processes are available even if the company is solvent and some may result in the rescue of the company.
Insolvency is stressful. The earlier it is addressed, the more options there are
It can be challenging, and highly stressful, to acknowledge that a company is facing financial difficulties for all involved – including the management, shareholders and employees of the company, their families, and the individuals and companies who face the possibility of having their debts go unpaid. Members of the insolvency and restructuring profession, including insolvency practitioners, can act as an impartial sounding board for your concerns, give you accurate information about your options, and relieve you of the burden of dealing with the situation alone.
Finally, it is important to remember that not every closure involves a company in financial distress. Sometimes a solvent company simply comes to the end of its life because the project for which it was created ends, the goods it produces become obsolete, or directors and shareholders reach retirement. Where this is the case, you may still need to take steps to conclude the company’s existence in an orderly and tax-efficient way, using a Members’ Voluntary Liquidation and we as insolvency practitioners can assist you with that process.
Please call any of our offices where are Insolvency Practitioners will be pleased to help you
Much of our work is referred to us by our contacts in the accountancy profession, and our first aim is to see if we can save a business through restructuring by using Administrations or Company Voluntary Arrangements. R3 figures show that around 40% of businesses are saves when an Insolvency Practitioner is appointed.
Contact us or call us on any of the numbers below for help and advice on insolvency, restructuring and recovery.
Also, K&W Recovery, trading as Antony Batty and Company, Thames Valley: