If your business is facing financial difficulties, you need to assess the facts quickly and understand the options available to you. This should include an analysis of the assets and liabilities of the business and whether there is a viable entity which can be saved via a restructure of the business. You should:
- consider what is in the best interests of the company and its creditors, keep records of decisions made and the reasons for the same.
- be responsible with further credit and the long-term strategy for repayment.
- create a plan to highlight vulnerable areas of the business and how you will deal with them.
Seeking early advice should be high on your priorities, the longer you wait to take advice the fewer the options that may be available to you.
If your business is facing possible insolvency, timing is crucial, retaining control to decide when, and if, a formal insolvency is required can help to secure funds to repay creditors, secure the position of employees and evidence your compliance with duties as a director .
Understanding your duties as a director
If your company is unable to pay its debts as and when they fall due there could be consequences for you as a director. The potential repercussions of not understanding this can be significant and could include a claim against you personally.
Wrongful trading concerns directors continuing to trade a company at a time when they knew, or ought to have known, that formal insolvency was unavoidable. They can be made personally liable for the losses in that period.
If you are a director of a company being pursued by a liquidator or administrator suggesting wrongful trading, it is imperative that you seek advice as soon as possible to respond to the claims being made and/or to mitigate your personal liability where possible.
Actions brought against you
If your business is faced with CCJs, statutory demands or a winding-up petition early advice is key.
Company & Individual Voluntary Arrangements
CVAs and IVAs are arrangements which allows the company or individual to reach a binding agreement with its creditors in relation to its debts. CVAs and IVAs involve an agreement to settle a proportion of debt, to settle debts over a longer period of time or a combination of both.
A CVA is a contractual arrangement which can be used to restructure debts and potentially allow a company in financial distress to continue to trade.
An IVA allows the individual to make a contribution to unsecured debts as an alternative to bankruptcy.
Creditors’ Voluntary Liquidation or Administration allows a company to be wound down whilst safeguarding as much as possible for creditors and where appropriate for the business to be restructured. Employees are also able to claim for redundancy.
If you wait for a winding up petition to be issued voluntary liquidation or administration become more complicated to begin, which increases costs, the company’s account will be frozen if the petition is advertised, and you will lose the control that you have prior to the petition being issued.
How we can help
Advice from an insolvency solicitor can be key to understanding your options. We act for insolvency practitioners, creditors and directors in relation to all manner of insolvency claims including claims for misfeasance of directors, under value and preference claims, transactions defrauding creditors and wrongful and/or fraudulent trading.
Please contact our specialist Insolvency team on 01254 268790 or 01204 527777