Here are some common business insolvency problems and potential options that may be applied as company rescue solutions. From finance to negotiating time to pay arrangements with creditors, this article will explore the options available to you.
That said, if you feel that your business may be in this scenario, the best course of action would be to call us before the worst happens. We offer a free confidential consultation, and have helped thousands of limited company directors find solutions to serious debt issues.
(1) Cash-Flow Problems
Poor cash-flow can be a symptom of something critically wrong with your business and it may be the model simply does not work and you may need to walk away. On the other hand it may be a symptom of something else that can be resolved.
It may be your business model is ‘tired’ and needs a revamp and we can often provide an objective fresh pair of eyes allowing you to see the business differently. Your accountant will have grown with the business so may be too close to obtain that objective arms’ length assessment. That’s where we fit in. We can provide you with an assessment of your business and see how we can improve your situation via an in depth analysis and solutions report outlining the steps to be taken.
One of the most common problems causing poor cash-flow is the problem of getting paid and the bigger the company the more likely you are to get delayed payments. In fact it has been estimated that over £30bn is held in delayed payments each year. Invoice management can be tricky especially when you don’t have the staff to provide adequate support but there are things you can do and we help by analysing your systems and identifying business critical ‘pinch points’.
Solutions to Problems with the Cash Flow Cycle may include:
- Advising on the business debt restructuring and negotiating with creditors
- Advising on the latest methods of improving cash-flow from due invoices such as invoice finance
- Advising on staffing levels and obtaining the best from staff
- Advising on outsourcing critical parts of the business and how this can be funded
- Raising finance using the company assets
- Director and or shareholder disputes
This is by no means a definitive list but provided as an illustration of common issues of concern for directors but you can see how we have helped other directors on the testimonial page.
Dealing with angry creditors is often part and parcel of rescuing a business and we have to walk a very fine line managing everyone’s expectations, but I am pleased to say we have a very good record of success. You can see what other directors have said about us on the testimonial page.
Whether it is an HMRC or a solicitor’s threat there are often things we can do that you cannot. Unfortunately as the business owner you are sometimes seen as the ‘guilty party’ by the creditor often through no fault of your own. We can usually take the heat out of the situation and bring about an amicable solution simply by providing an objective and independent view. Debtors paying late and or failed orders can all have a dramatic impact on your business ability to pay creditors.
By stepping between you and the often frustrated and angry creditor we can usually calm matters and identify a payment plan all parties can live with.
(2) Failed HMRC Time to pay Arrangement
HMRC will inevitably want paying within 12 months and will not take kindly to a failed time to pay arrangement so it is critical to get professional input before committing to a payment plan. Often the pressure of the situation will mean the business owners agree to a proposal they cannot possibly deliver. A common mistake when agreeing to a payment plan with HMRC is not to take into account ongoing taxes when due. Any HMRC payment plan will only be accepted on the strict understanding that all other taxes are paid promptly in a timely fashion. In effect this means that although the company may keep to the original payment schedule a corporation tax bill may become due and cannot be paid. If this does happen HMRC will almost certainly take legal action against the company (not the director) and start winding up proceedings. These legal proceedings incur legal costs that will be added to the tax debt and the company will be compulsory closed possibly in an appropriate high court dependent on the size of the debt.
Any compulsory liquidation via a winding up petition can have serious consequences for a director where there is a significant HMRC tax liability remaining unpaid and this is especially the case with PAYE/NI.
Experienced HMRC Mediation Can Help
Quite often a professionally prepared and proposal provided by an independent and insolvency experienced source may be accepted where a proposal from a director has been previously declined. We bring a wealth of experience and knowledge of this area we have had some success with HMRC where previous proposals have been declined and even legal action threatened.
As a note of caution there is no guarantee of success as a lot will depend on how much the confidence of HMRC has been injured and whether there is a negative history of the director.
(3) Winding up Petition
Any director in receipt or threat of winding up petition must act immediately if they wish to continue to trade as ignoring the problem (of a winding up petition) will almost certainly make matters worse.
Rescuing a business in these circumstances can be fraught with difficulty but we have an excellent track record of success as our testimonials will testify. The message to directors is clear due to the very serious time constraints so you must never ignore a petition as the situation will get steadily worse. The winding up of a company is about as serious as it gets and if you do receive a petition you must act immediately or better yet act when you receive the threat of a petition.
This form of winding up involves the compulsory liquidation of a limited company, so it does not affect sole traders as individuals would be made bankrupt in similar situations. However you look at this situation it is not a good one to be in so it should be avoided at all costs.
A Company Voluntary Arrangement Could Rescue the Business
The good news is if we are contacted early enough then we can often rescue the business if not the company though this is sometimes possible. A lot will depend on the petitioner and their objectives as they may by this stage have malicious intent. If the intent is to get the best return they can a lot may ‘boil down’ to whether the company has assets or not and the return to the creditor.
So, prior to the issue we may be able to agree a company voluntary arrangement if a payment proposal is not acceptable (see above). The company voluntary arrangement differs as it is legally binding on the creditor and company owing the debt.
If there are assets in the company and or sizeable contracts due and the company needs more time it may be a pre-pack administration may be more appropriate. In effect the winding up petition can be stopped whilst a proposal by the administrator is assessed and presented to the creditors. So if the company has a large contract due in six months but HMRC want their money now this could be an ideal solution. If for whatever reason the company cannot be rescued then the compulsory liquidation may go ahead or a creditors’ voluntary liquidation may be agreed.
Although HMRC are responsible for more winding up petitions than anyone else they have no right to take preference over other creditors, as they lost this right in the 2002 Business Enterprise Act.
Once we are contacted we will act immediately to assess the situation and contact the creditor on your behalf where required to start to take the pressure away. We will also provide a rescue plan outlining in clear terms what you need to do if you want to continue trading in way or another.
Here to Help
To discuss your company rescue options call now to speak to a company rescue specialist who can help call us on 08000 746 757; email us at [email protected]; or use the Live Support feature at the bottom-right of this page.