It is a well-known fact that most companies facing financial difficulty call in the help of insolvency practitioners too late.
But burying your head in the sand will get you nowhere, and the later you reach out for expert help, the fewer options you will have available to you. In fact, if you enlist the help of an insolvency practitioner at the first sign of financial distress, you could end up turning things around and your business could end up thriving.
Every company, no matter its size or specialism, will face some kind of financial crisis at some point. So, in this blog, we explain what it is an insolvency practitioner does and how they can help you should your company be in trouble.
What is an insolvency practitioner?
Firstly then, what is an insolvency practitioner? According to ICAEW, an insolvency practitioner is someone who is licensed and authorised to act in relation to an insolvent individual, partnership, or company.
In most cases, insolvency practitioners work with businesses that are struggling financially to help them repay what they owe and, where possible, rescue the company. However, if this isn’t possible for any reason, they will also help to guide the company directors through the process of closing the business down.
Here’s how an insolvency practitioner will help if your company is in crisis:
5 ways an insolvency practitioner can help companies in crisis
1. Assess the situation with a fresh pair of eyes
If you’ve been wracking your brains and going around in circles trying to find a solution to your financial struggles, an insolvency practitioner can bring a fresh perspective to the situation.
Not only do they have the experience and knowledge to look at what’s going on with your company and help to put a plan in place (more on that below!) but they can also provide an objective opinion as someone with no emotional attachment to the company.
If you are going to survive insolvency, you need someone who is dispassionate and will simply look at the facts to help you bridge the gap between your current financial situation and your desired outcome in the future.
Which leads us onto our next point…
2. Build a business rescue plan
Once they’ve looked at what is going on in your business, an insolvency practitioner will then begin to build a business rescue plan.
This could include anything from streamlining the business and cutting costs where possible and scrutinising your cash flow to identify where improvements can be made to making staffing recommendations.
They might even seek to introduce new management to give the business a new focus. We didn’t say it was going to be an easy process - but if your business is going to live to fight another day, it’s certainly a necessary one.
3. Explore official insolvency procedures
A licensed insolvency practitioner will also be able to administer formal insolvency processes and turnaround solutions such as company administration and company voluntary arrangements.
Company voluntary arrangement
A company voluntary arrangement (CVA) is a business rescue and restructuring option which can help to ensure the survival of your company.
If a company has a viable future and the directors accept the need for change, a CVA enables you to avoid liquidation and instead focus on paying your creditors what you can afford.
A CVA is a formal arrangement between a company and its creditors highlighting that whilst your business might not be able to pay its debts at present, it will be able to in the future.
An official agreement will then be made between your company and its creditors for you to pay towards your debts for an agreed period - usually five years - before your remaining debts are written off.
Company administration
Similarly to a company voluntary arrangement, company administration is a business rescue procedure that enables you to protect your business whilst a plan is worked out about how to move forward.
Unlike a CVA, when a company enters into administration, control of the business is taken over by the administrators before a moratorium is placed around it preventing all legal action.
Then, depending on the severity of the problem, the company administrators will either look for a way to turn the business around, or, if necessary, sell the business and its assets in order to pay back its creditors.
Although it sounds intimidating and is not a process that should be taken lightly, company administration could actually be a shrewd step that buys your business time, enabling you to restructure your debts, find a way forward, and hopefully enjoy a new beginning.
4. Liaise with creditors and stakeholders
If you find the prospect of dealing with your creditors leave you with dread, an insolvency practitioner will also be able to liaise with your external creditors and stakeholders.
From lawyers, banks, and investors to HMRC and other significant creditors, an insolvency practitioner will liaise with all the relevant parties and help to agree different payment terms.
Plus, once a plan of action has been decided, they will also be able to present the business plan to your stakeholders. They will also be able to speak to trade unions where appropriate on your behalf too.
5. Close things down legally and properly
Finally, if it is decided that your company has no viable future, an insolvency practitioner will be able to help you close your business down whilst making sure everything is dealt with properly.
A creditors’ voluntary liquidation (CVL) enables you to close the doors, deal with your debts, and ultimately move on with your life. Should you decide to liquidate your business, a CVL is a relatively straightforward process whereby creditors are dealt with, leases are cancelled, and all loose ends are tied up.
There are a number of benefits to a CVL. For starters, you can make the decision about when your company should be closed, preventing any further losses to creditors and showing that you are acting responsibly in your role as a company director.
Additionally, a CVL also gives you a chance to prepare for what’s coming and commence staff redundancy procedures more quickly.
How McAlister & Co can help your company
If your company is in crisis, an expert insolvency practitioner such as McAlister & Co can help you to find the right solution for you so you can take back control and begin to move forward.
The sooner you seek advice, the more options you will have available. So, if you are facing financial difficulty and are not sure where to turn, contact us today for free, confidential advice.
