Are you concerned about your business’s financial health? Are you struggling with cash flow problems? If so, you’re not alone. Many businesses face financial challenges at some point, and it’s important to seek help early on.
At Company Debt, we provide FREE, CONFIDENTIAL online insolvency advice to help you understand your situation and make the best decisions for your company. We have decades of experience in turnaround and insolvency, and we’re licensed Insolvency Practitioners. This means we’re experts in helping businesses overcome financial difficulties.
We have a team of business rescue advisors who can help you find out if there is a chance of restructuring or negotiating with creditors. We also have fully qualified Insolvency Practitioners to deal with any necessary formal company closure. The initial insolvency advice is always free.
When Can Small Businesses Seek Insolvency Advice?
As a business owner, it’s crucial to recognize the early warning signs of insolvency. These red flags may include:
- Persistent cash flow problems: Difficulty meeting financial obligations, such as paying suppliers or making employee salaries, is a significant indicator of potential insolvency.
- Short-term liabilities exceeding assets: When your company’s short-term debts outweigh its assets, it suggests an inability to meet financial commitments.
- Inability to secure financing: If you’re struggling to obtain loans or other forms of financing, it may be a sign of underlying financial weakness.
- Declining sales and revenue: A steady decrease in sales and revenue can put a strain on your company’s finances and increase the risk of insolvency.
Another good reason to get advice early is that it may provide some legal protection later. If you are a director, it’s generally helpful to demonstrate you were aware of potential insolvency and sought professional guidance. However, even if you have obtained advice, if your business is insolvent and you continue trading or do not put creditors’ interests first, you will create further risks to yourself as a director.
All Insolvency Practitioners are duty-bound to investigate director conduct, but if the Official Receiver is appointed to the role as part of a compulsory liquidation, this can be even more worrying for directors.
Where to get Insolvency Advice for your Business
If your business is insolvent, you should speak to a fully licensed and regulated Insolvency Practitioner as soon as possible. If you appoint the Insolvency Practitioner (usually in voluntary liquidation), his or her role is primarily to protect creditors, but he or she can often also provide some advice to you in a personal capacity.
If you are worried that your business is insolvent, the best sources of advice are generally:-
- Your accountant
- An Insolvency Practitioner
- Business Restructuring specialists
- Business debt charities such as Business Debt Line, Money Advice Trust or The Debt Advice Foundation.
Insolvency Advice for Directors
When an Insolvency Practitioner is appointed, he or she has no legal duties to the company’s directors. However, there is no reason why a director cannot obtain advice themselves if worried about potential risks from personal guarantees or investigation of their conduct, either from an independent Insolvency Practitioner, accountant, solicitor or anyone of their choosing.
In some cases, especially where the directors appoint the Insolvency Practitioner on a voluntary liquidation, the appointed Insolvency Practitioner will often provide a director with some advice, informally, where the IP does not believe there is any potential negative impact on creditor interests and no obvious conflict of interest.
Whoever you decide to seek advice from, we recommend that you record the process to protect yourself later and generally act on the recommendations from experienced specialists.
Seeking insolvency advice early offers several advantages:
- Increased chances of business recovery: Prompt intervention by an insolvency practitioner can help identify potential solutions and implement restructuring strategies to restore your company’s financial health.
- Mitigation of personal liability: As a director, you have a duty to act in the best interests of your company’s creditors. Seeking early insolvency advice can help protect you from personal liability arising from insolvent trading.
- Improved legal protection: Demonstrating that you sought professional guidance when financial difficulties arose can strengthen your legal position in the event of insolvency proceedings
What to Expect from an Insolvency Advisor
As licensed insolvency practitioners, we prioritize assessing your financial situation and providing them with tailored guidance on your options for dealing with debts.
Insolvency practitioners can provide expert guidance on various options, including:
- Time to Pay (TTP) arrangements: This agreement with HMRC allows you to repay your tax debts in installments.
- Company Voluntary Arrangements (CVAs): CVAs involve negotiating a restructured debt repayment plan with your creditors.
- Administration: In administration, an independent administrator is appointed to manage your company’s assets and affairs, aiming to rescue the business or achieve a better return for creditors.
- Liquidation: Liquidation involves winding up your company’s affairs, selling its assets, and distributing the proceeds to creditors.
Remember, seeking insolvency advice early is crucial for increasing the chances of business recovery and protecting yourself from personal liability. Don’t hesitate to reach out to a qualified insolvency practitioner for assistance.
What happens if you can’t afford insolvency?
As a director, it is your legal duty to act in the best interests of your company and its creditors. If your company is insolvent, this means taking steps to minimize losses to creditors and avoid wrongful trading.
If you cannot afford to liquidate your company, you may have the following options:
- Ask your insolvency practitioner about instalment plans. Some insolvency practices offer instalment plans to directors who cannot afford to pay the fees upfront.
- Negotiate the fees. It is also possible to negotiate the fees with your insolvency practitioner. This may be possible if your company has limited assets or if you are offering to pay the fees over a longer period of time.
- Seek financial assistance from family or friends. You may be able to borrow money from family or friends to help cover the cost of the insolvency practitioner’s fees.
Insolvency Advice FAQS
When should I seek insolvency advice as a company director?
As a director, you should seek insolvency advice if your company is experiencing financial difficulties and is struggling to pay its debts. It is important to act promptly, as delaying may make the situation worse and increase the risks of personal liability.
What are my responsibilities as a director when my company is insolvent?
When a company becomes insolvent, the directors’ legal duties shift from pursuing the interests of shareholders to the interests of creditors. As a director, you have a duty to act in the best interests of the company and its creditors, and to avoid any actions that could worsen the company’s financial position.
What are my options for dealing with my company’s debts?
Several options are available to companies facing financial difficulties, including restructuring, refinancing, and insolvency procedures such as administration or liquidation. Company Debt’s insolvency practitioners can help you understand the pros and cons of each option and guide you through the process.
What are the risks of personal liability as a director when my company is insolvent?
When a company is insolvent, the directors can be held personally liable for the company’s debts in certain circumstances, such as if they continued to trade when they knew or should have known that the company was insolvent. Company Debt’s insolvency practitioners can help you understand your potential liability and take steps to mitigate it.
How can I find a reputable insolvency advisor?
You can find a reputable insolvency advisor by researching, seeking your accountant’s recommendations, and checking for professional qualifications and accreditations. Company Debt’s insolvency practitioners are experienced, knowledgeable, and transparent about our fees and services. The first consultation is confidential and completely free.