Welcome to our round-up blog concluding our series on ‘options available to struggling companies’. If you want to catch up with any of the series so far please see the ‘related blogs’ links at the bottom of this article.
We’ve covered a lot of information over the past six weeks so we’ve brought together the most important points of process and each of the options a struggling company could have available to it. The most important thing to remember is that the sooner you seek professional advice, the more of these options will stay open to you.
One of the first things you need to quickly establish is if your company could be insolvent so take our quick test to find out. Even if you pass the test with flying colours it is still a good idea to seek advice as there might be improvements you can make that could see your business doing even better.
A business health check should be considered a must no matter if you think you might be struggling or not. Even if you’re company is not classed as insolvent; but you’re feeling the pressure, there is usually some turnaround advice that can be implemented to ease the problems and get things back on track. An independent advisor can often see problems and ways to help earlier than directors who are involved in the day-to-day running of matters.
If you think your company might be insolvent then you need to start making some important decisions with the help of an insolvency practitioner, remember that all initial advice will be free of charge so weighing up your options isn’t going to make things worse, it can only ever improve the situation.
One of the most important questions you will likely be asked when deciding what insolvency option best suits your company is do you want to continue trading and attempt rescue as the current company? The next is to ask if the company is able to be rescued. The answers to these along with other aspects of your business (e.g. assets and liabilities) will determine what option suits you best.
Company Voluntary Arrangement (CVA) – Continue Trading
You want to continue trading and have monthly surplus that you can make available to your creditors. Costs are taken from the monthly payment and the balance distributed to creditors. Any remaining debt the company cannot afford being written off after 60 months.
Administration – Continue Trading
The company is rescued as a going concern, an administrator takes over the management of the company until a buyer can be found to maximise returns to creditors. The company will continue to trade as the same business, you may be the one to buy it back or it may be returned to you if the administrator manages to pay all creditors in full. An independent buyer may be found leaving you free of the business. Costs are met from available assets and not personally by directors.
Pre-Pack Administration – Cease Trading
The sale of the company is agreed before the administration. You may be looking to set up a new company with the assets, workforce and premises of the old one effectively closing the first company (ceasing to trade) and opening a new one. Alternatively the company/assets may have been agreed to be sold to someone else leaving you free of the business. In either case the original company will usually cease trading as a result. Costs are met from available assets and not personally by directors.
Creditor’s Voluntary Liquidation (CVL) – cease trading
Shareholders decide to wind up the company, and it is passed to a liquidator who will sell the assets and maximise the return to creditors. Costs are met from available assets.
Whichever options you consider is most appropriate to your circumstances it is important to remember that the sooner you seek advice, the more likely it will be that you choose the option you want for your company rather than having an option chosen for you like compulsory liquidation. As the statistic below show, liquidations are on the increase meaning that people are seeking advice for their businesses too late and having to take more extreme courses of action that do not enable the company’s rescue.
Focus Insolvency Group are licensed insolvency practitioners and can offer you free and impartial advice, the sooner you seek that advice the better so contact us with any questions you might have either with a comment on the blog or by phone or email.
We will return next Monday with a new blog so if you have any feedback or want to see a particular topic discussed then please let us know.