When your company has become insolvent your duties as a director are highlighted even more. It is critical that you act in a way that denotes professionalism and forethought for the creditors and your limited company to prevent accusations of wrongful trading or irresponsible trading.
It can be a worrying time for any director when your company cannot afford to pay bills on time and the ideal path to take is not always clear.
This is usually where a good insolvency firm comes into its own, however, there are things that you can do to make the whole process easier and also to prevent further complications for your the insolvency that you choose to help you.
Things you can do to help the insolvency process and manage creditors better
Don’t always oil the squeaky door…
One of the first things is to stop paying anyone until you have spoken to an insolvency consultant. Believe it or not paying off a creditor can get you in more trouble than you might think. Let’s imagine for a moment that your company owes a trade creditor several thousand pounds and your company also owes HMRC several thousand pounds for VAT or PAYE. Just because the trade creditor may be making more ‘noise’ than HMRC at this stage it doesn’t necessarily mean that you should pay them off straight away. This would be fantastic for the trade creditor and you would be forgiven for thinking why that may be a good thing, however, your company also has a debt with HMRC and at a later stage within the insolvency process, they will likely ask why you paid off the trade creditor and not them. This could be classed as ‘showing preference’ which is a big ‘no-no’ when handling insolvency. You must not show preference to one creditor over another, regardless of who they are.
Don’t fall off the face of the planet!
Stay in touch with your creditors as much as you can up until you pass the communication over to us. We will effectively act as a shield between you and the creditors, fielding any communications fully so that you can focus on implementing the actions that we discuss. However, ignoring calls, letters or legal threats will only make matters much worse so make sure you let the creditors know that you are currently receiving insolvency advice to manage the situation properly.
Act swiftly, don’t stick your business head in the sand!
Don’t hesitate when you learn that your company has become insolvent, delaying decisions is one of the worst things you can do as it could hinder your position by not taking action sooner rather than later when your options may have reduced considerably.
Do your insolvency homework!
Once you are ready to speak with an insolvency consultant you should always take the time to read through any testimonials thoroughly and always ask if you can speak with previous clients that the insolvency firm has helped in the past. This will be a good indicator of the quality of the insolvency firm. There are many options and solutions that are designed to help struggling limited companies such as liquidation, company voluntary arrangements and administration, but there are few firms out there that will act in the interests of the directors so be careful who you choose to represent you.
For more information on the types of solutions available to you like liquidation, company voluntary arrangements and administration have a read through our site or give us a ring for a chat to see how we can help you with your situation.