Are you concerned that your company might be approaching insolvency? Are you struggling with cash flow problems or facing persistent creditor pressure?
At Company Debt, we provide FREE, CONFIDENTIAL online insolvency advice to help you understand your situation and make the best decisions for your company. We have decades of experience in turnaround and insolvency, and we’re licensed Insolvency Practitioners.
We have a team of business rescue advisors who can help you find out if there is a chance of restructuring or negotiating with creditors. The initial insolvency advice is always free.
When Should a Business Seek Insolvency Advice?
As a business owner, it’s crucial to recognise the early warning signs of insolvency and seek professional advice promptly. Here are key indicators that suggest it’s time to consult an insolvency expert:
Persistent cash flow problems:
Recurring difficulty in meeting financial obligations
Inability to pay suppliers or employee salaries on time
Frequently maxing out credit lines or overdrafts
Short-term liabilities exceeding assets:
Current debts outweigh readily available assets
Struggle to meet immediate financial commitments
Inability to secure financing:
Rejection of loan applications or credit extensions
Existing lenders reducing credit limits or calling in loans
Declining sales and revenue:
Consistent decrease in sales over multiple quarters
Significant drop in profit margins
Mounting creditor pressure:
Receiving final demands or legal threats from creditors
Creditors refusing to supply goods or services without upfront payment
Tax arrears:
Falling behind on tax payments to HMRC
Accumulating VAT or PAYE debts
Seeking early advice offers several benefits:
Legal protection: Demonstrating awareness of potential insolvency and seeking professional guidance can help protect directors from personal liability claims.
More options: Early intervention often provides a wider range of restructuring or turnaround options.
Stakeholder confidence: Proactive management can help maintain relationships with creditors, suppliers, and employees.
However, be aware that seeking advice alone is not enough. If your business is insolvent, continuing to trade without putting creditors’ interests first can still create risks for directors.
Important: All Insolvency Practitioners are duty-bound to investigate director conduct, but if the Official Receiver is appointed to the role as part of a compulsory liquidation, this can be even more worrying for directors.
If you feel you are close to the tipping point, we recommend you conduct an insolvency test with the assistance of your accountant.
Where to get Insolvency Help for your Business
If your business is insolvent, you should speak to a fully licensed and regulated Insolvency Practitioner as soon as possible. If you appoint the Insolvency Practitioner (usually in voluntary liquidation), his or her role is primarily to protect creditors, but he or she can often also provide some advice to you in a personal capacity.
If you are worried that your business is insolvent, the best sources of advice are generally:-
When an Insolvency Practitioner is appointed, he or she has no legal duties to the company’s directors. However, there is no reason why a director cannot obtain advice themselves if worried about potential risks from personal guarantees or investigation of their conduct, either from an independent Insolvency Practitioner, accountant, solicitor or anyone of their choosing.
In some cases, especially where the directors appoint the Insolvency Practitioner on a voluntary liquidation, the appointed Insolvency Practitioner will often provide a director with some advice, informally, where the IP does not believe there is any potential negative impact on creditor interests and no obvious conflict of interest.
Whoever you decide to seek advice from, we recommend that you record the process to protect yourself later and generally act on the recommendations from experienced specialists.
Seeking insolvency advice early offers several advantages:
Increased chances of business recovery: Prompt intervention by an insolvency practitioner can help identify potential solutions and implement restructuring strategies to restore your company’s financial health.
Mitigation of personal liability: As a director, you have a duty to act in the best interests of your company’s creditors. Seeking early insolvency advice can help protect you from personal liability arising from insolvent trading.
Improved legal protection: Demonstrating that you sought professional guidance when financial difficulties arose can strengthen your legal position in the event of insolvency proceedings
As licensed insolvency practitioners, we prioritise assessing your financial situation and providing tailored guidance on your options for dealing with debts.
Insolvency practitioners can provide expert guidance on various options, including:
Time to Pay (TTP) arrangements: This agreement with HMRC allows you to repay your tax debts in instalments.
Company Voluntary Arrangements (CVAs): CVAs involve negotiating a restructured debt repayment plan with your creditors.
Administration: In administration, an independent administrator is appointed to manage your company’s assets and affairs, aiming to rescue the business or achieve a better return for creditors.
Liquidation: Liquidation involves winding up your company’s affairs, selling its assets, and distributing the proceeds to creditors.
Remember, seeking insolvency advice early is crucial for increasing the chances of business recovery and protecting yourself from personal liability. Don’t hesitate to reach out to a qualified insolvency practitioner for assistance.
What Happens if you Can’t Afford Insolvency?
As a director, it is your legal duty to act in the best interests of your company and its creditors. If your company is insolvent, this means taking steps to minimise losses to creditors and avoid wrongful trading.
If you cannot afford to liquidate your company, you may have the following options:
Ask your insolvency practitioner about instalment plans. Some insolvency practices offer instalment plans to directors who cannot afford to pay the fees upfront.
Negotiate the fees. It is also possible to negotiate the fees with your insolvency practitioner. This may be possible if your company has limited assets or if you are offering to pay the fees over a longer period of time.
Seek financial assistance from family or friends. You may be able to borrow money from family or friends to help cover the cost of the insolvency practitioner’s fees.
Insolvency Advice FAQS
When should I seek insolvency advice as a company director?
As a director, you should seek insolvency advice if your company is experiencing financial difficulties and is struggling to pay its debts. It is important to act promptly, as delaying may make the situation worse and increase the risks of personal liability.
What are my responsibilities as a director when my company is insolvent?
When a company becomes insolvent, the directors’ legal duties shift from pursuing the interests of shareholders to the interests of creditors. As a director, you have a duty to act in the best interests of the company and its creditors, and to avoid any actions that could worsen the company’s financial position.
What are my options for dealing with my company’s debts?
Several options are available to companies facing financial difficulties, including restructuring, refinancing, and insolvency procedures such as administration or liquidation. Company Debt’s insolvency practitioners can help you understand the pros and cons of each option and guide you through the process.
What are the risks of personal liability as a director when my company is insolvent?
When a company is insolvent, the directors can be held personally liable for the company’s debts in certain circumstances, such as if they continued to trade when they knew or should have known that the company was insolvent. Company Debt’s insolvency practitioners can help you understand your potential liability and take steps to mitigate it.
How can I find a reputable insolvency advisor?
You can find a reputable insolvency advisor by researching, seeking your accountant’s recommendations, and checking for professional qualifications and accreditations. Company Debt’s insolvency practitioners are experienced, knowledgeable, and transparent about our fees and services. The first consultation is confidential and completely free.
