If your business is facing financial uncertainty, McAlister & Co offer a trusted insolvency service to provide expert business insolvency help.
Running a company can be stressful at the best of times. But if your business is undergoing financial difficulty and creditors are waiting to be paid, business insolvency can be an incredibly testing time.
However, the sooner you act, the more options you will have available to you - which means you can ensure the best possible outcome for you and your business.
At McAlister & Co, we offer a range of financial support services and business insolvency help for companies dealing with financial difficulty - so read on for our top tips for directors of businesses facing insolvency…
7 Key Tips and Insolvency Advice for Directors of Insolvent Companies
1. Get Professional Insolvency Advice Early
If your business is facing insolvency, it’s really important to seek expert business insolvency help and advice as soon as possible.
Knowing when to cease trading can be difficult - for starters, it’s a fine line between financial difficulty and insolvency. Perhaps you want to trade yourself out of insolvency or don’t want to let your staff down so think you should just keep plodding on and hope for the best.
Whatever your situation, one thing’s for sure: the sooner you seek advice, the better. An expert insolvency practitioner will be able to offer financial support services, provide advice and guidance to ensure the best possible outcome and also ensure you act lawfully to avoid any wrongful trading accusations.
So, if you’re facing financial difficulty, it’s essential that you seek expert help as soon as possible.
2. Prioritise Creditor Interests During Financial Difficulty
When facing company insolvency, it’s critical to prioritise your creditors’ interests above those of the business. Once a company becomes insolvent, directors have a legal duty to shift focus away from shareholders and towards minimising losses to creditors. Failing to do so can result in personal liability for company debts and potential accusations of wrongful or unlawful trading.
During liquidation, a company insolvency process, the appointed liquidator is legally required to report on the conduct of company directors. That’s why it’s vital to ensure that the interests of your creditors are always at the forefront.
Your ultimate aim should be to reduce losses for those owed money. Engage with creditors openly and honestly to build trust and maintain transparency. Doing so not only strengthens relationships but can also support better outcomes as you explore the options available, whether that’s entering into a Company Voluntary Arrangement (CVA), administration, or a Creditors’ Voluntary Liquidation (CVL).
3. Maintain Accurate Financial Records for Insolvency Protection
Whilst it’s always important to keep clear financial records, doing so becomes absolutely essential during times of financial difficulty.
Accurate documentation can help demonstrate a clear route into insolvency, potentially shortening the length and scope of investigations. Well-maintained records will also support your insolvency practitioner, making the process more straightforward and helping to reach a resolution efficiently.
If you work closely with your accountant, they can help interpret these records, assess your financial position, ensure compliance with HMRC obligations, and advise on key decisions. This level of professional input is vital when you're facing pressure and need to avoid costly errors.
Monitoring your financial position regularly and maintaining a written record of key discussions and decisions will also help show creditors that you’re acting transparently and responsibly. It demonstrates a genuine commitment to resolving the situation and finding the best outcome for all parties involved.
4. Avoid Taking on Additional Credit if Your Business Is Struggling
Whilst you might be tempted to incur further credit in a bid to trade yourself out of financial difficulty, it is never a good idea. Incurring more credit will only make things worse: it will weaken your position, portray you negatively in front of your creditors and you could be viewed as acting in an improper manner.
When facing insolvency, you instead need to focus on reducing your expenditure, showing your creditors that you are taking control of the situation and putting their needs first. If you do want to continue trading, always contact an insolvency practitioner for expert advice so that you can find a lawful solution that works for all parties.
5. Create a Business Recovery Plan to Avoid Insolvency
Despite all of this, remember that facing insolvency doesn’t have to mean the end. In fact, if your company has a viable future, it’s important to make a recovery plan as soon as possible so you are completely clear on the next steps that need to be taken.
Your plan should accurately reflect the standing of the company and cover legal issues such as tax savings, as well as identifying the most important areas of your business, such as what is needed to keep your company running, your basic operating budget and the minimum financing needed, as well as an action plan should disaster strike.
A business recovery plan essentially gives you a chance to start again, change management strategies, approach problems from a new angle, or just generally refresh the business and renew interest.
6. Safeguard Company Assets During Financial Uncertainty
When facing business insolvency, the value of your company assets must always be protected, so it’s important to make sure they are secure. Directors who try to sell or dispose of company assets could face allegations of misconduct - and this includes moving assets into another company or giving them to creditors as a form of payment.
Whilst it may be tempting to sell your assets as quickly as possible to pay your creditors, if it is found that your company assets were sold at undervalue or transferred without consideration to their overall value, the transaction might be set aside.
The directors would also be personally liable for any losses incurred. If you do decide to sell your assets, make sure they are valued professionally and ensure you don't sell undervalue by seeking advice from an insolvency practitioner.
7. Avoid Using Personal Funds to Rescue an Insolvent Business
Finally, however tempting it may be, never put your own money into a company in an attempt to try and save it.
A company’s limited liability structure is there to protect you and means that your business is a separate legal entity with no liability implied for you as a director - so it’s important to keep business and personal finances separate.
Act Now to Get Expert Business Insolvency Advice from Licensed Practitioners
When it comes to business insolvency, it’s really important to seek expert advice from insolvency practitioners as early as possible. The longer you ignore any financial difficulties, the worse things will become.
At McAlister & Co, we are licensed insolvency practitioners who provide advice on business insolvency to directors, sole traders and partnerships.
We offer a range of financial support services, from obtaining a valuation of your business assets and dealing with your creditors to protecting your home and personal assets, our dedicated team will help take the stress out of this complicated time.
There’s no need to face financial difficulty alone - contact us now for FREE initial business insolvency advice.