Anyone who has ever set up their own business knows that, despite the cliche ‘it’s not personal, it’s just business’, when things start to go wrong and your business starts to struggle, it can feel very personal indeed. Whatever the reasons for the situation you and your business find yourselves in, it’s very unlikely that this was something you ever planned for; but if there is a chance of saving your business it’s important you do start thinking about the action you need to take to try and make sure you come out the other side.
It can be tempting to avoid addressing the underlying issues that are causing the problem, with the vain hope that if you simply continue to keep running the business the way you’ve always run it things will eventually turn around. But the way things are run may be the issue that needs sorting, and any reprieve is likely to be temporary if you keep doing what you’ve always done.
If your business is struggling, despite all the hard work and effort you are putting into it, it’s probably time to call in some professional help. If your company is unable to meet its financial obligations then this is the kind of situation where a firm of Insolvency Practitioners could help.
Insolvency means that a business is unable to raise enough money to meet its contractual obligations and pay its debts when they are due, a serious situation which, if left unresolved, can make it difficult for a business to continue operating.
Despite the fact that Insolvency Practitioners are often involved in the liquidation of companies, one of the various duties they could be required to undertake, they are usually specialist Accountants whose main aim is to actually rescue a business rather than facilitate its demise. However, every situation is going to be different, and there has to be enough of the business left for them to save – which is why it is always a good idea to seek their advice sooner rather than later.
It’s true that one option for a company that is struggling may be the liquidation of the business, either voluntarily via a Creditors’ Voluntary Liquidation (CVL) or a Compulsory Liquidation enforced by the courts with a Winding-up Order requested by the creditors who are owed money. But there are also a number options an Insolvency Practitioner could consider that would save the business and provide it with some protection to help it finds its way out of the current, insolvent position it’s in.
An Insolvency Practitioner may be able to arrange a Company Voluntary Arrangement (CVA) where the company is allowed to pay off their debts over a fixed period of time, which can be between 3 and 5 years. This could relieve the pressure of the outstanding debts and constant demands for repayment, and free up cash to help the business trade its way out of trouble. The directors of the business would remain in control and, while there would be an impact on the credit rating of the business, the associated costs and protection from legal action may make this an attractive option – as long as 75% of the creditors (by amount owed) agree to it.
Alternatively, putting the company into Administration may be the most appropriate course of action – this still provides the protection from legal action but involves handing over control of the business to the Administrator. Where a business has significant assets or contracted business that would provide stability over the long-term and it is essentially a good business that is suffering from severe cash-flow pressure, this option could allow for restructuring that means it is in a much stronger position when it emerges from Administration after 12 months.
Which of these options may be available to you, and which would be best, is likely to depend on your current situation and the potential your business has for trading its way back to health. Part of an Insolvency Practitioner’s role does involve winding-up companies to get creditors as much of their money back as possible, but they are also the best people to save a business if it can be saved. So if your aim is to avoid liquidation and keep your business going, it’s easy to see why getting professional advice from these specialists as soon as possible is essential.
