If your company can’t pay its bills when they are due, it is technically insolvent.
Whether it’s because of poor cash flow management or late payments from your clients, crossing the threshold into insolvency can be a stressful time.
However, the good news is that just because your company is facing insolvency, it doesn’t mean that you can’t recover.
In fact, if you take action as soon as you are on the brink of becoming insolvent, you may be able to turn things around and improve the chances of your business surviving.
With that in mind, read on to discover our expert advice to help you survive insolvency.
Expert advice to help you survive company insolvency
1. Contact your creditors
When you are facing insolvency, it is tempting to turn away and hope that everything will get better on its own.
Sadly, though, this isn’t the case - and the sooner you face up to what’s going on and reach out to your creditors, the better your chances of surviving insolvency.
However daunting it might be to contact angry creditors, the fact is that the majority would much rather give you more time to help you pay up than take legal action against you. It’s always worth trying to reach an informal payment agreement before exploring other options.
2. Set up a Time to Pay
If you are currently in debt to HMRC, rest assured you aren’t alone. In fact, HMRC are the biggest creditor in the UK.
Whether you are struggling to pay VAT, corporation tax, or VAT, it’s worth contacting HMRC as soon as possible to see if you can set up a payment plan with them.
Known as a “Time to Pay” arrangement, most agreements with HMRC last 12 months and give you the chance to pay back your tax liabilities over time.
Learn more about how to arrange a Time to Pay arrangement with HMRC in this helpful blog post.
3. Consider alternative financing
If your company is struggling with cash flow and simply needs a cash injection to help you turn things around, there are several financing options that can help you to rescue your business.
From crowdfunding and peer-to-peer lending to asset finance, business loans, or even invoice factoring and discounting, there are many ways you could secure additional finance.
4. Enter into a CVA
A company voluntary arrangement or CVA is a formal agreement between an insolvent company and its creditors whereby the debt is repaid in full, or in part, over and agreed period of time.
A CVA is a powerful business rescue option that enables you to ring-fence your business whilst a solution is found. It highlights that whilst at present your company cannot pay its debts, it will be able to do so out of future profits.
Your business will then pay towards its debts for an agreed period - usually five years - after which your debts will be written off. Plus, once the CVA has been agreed, you can resume trading once more.
Learn more about the CVA process and discover whether or not it is right for you in this blog.
5. Consider pre-pack administration
If your company is struggling to pay its debts but would be viable if it could be restarted, a pre-pack administration is a solution that enables you to close down and restart your company without your debts.
It works by allowing the business to be packaged and sold to a new company - often controlled by the same directors - providing that strict statutory requirements are met.
6. Close the business down with a CVL
Finally, if it is decided that your company cannot be saved, a creditors’ voluntary liquidation (CVL) is a quick and powerful way to close your business down and ensure that everything is dealt with properly.
When a company enters a creditors’ voluntary liquidation, a liquidator is appointed. All debts that cannot be repaid are written off, and the company is removed or “struck off” from the Companies House register.
If you’d like to learn more about how the CVL process works, we answer your most popular liquidation questions in this blog.
Specialist insolvency advice from McAlister & Co
If your business is undergoing financial difficulty, the sooner you act, the more options you will have available.
When you enlist the help of our team of insolvency experts at McAlister & Co, our team will provide clever, strategic advice and work hard to find the best solution for your company.
Ready to take back control? Contact us today to find out more about how we can help.
