Saving Your Business from Insolvency

The creation of any business takes hard work and dedication – so when you find yourself in the unfortunate position of your business failing – it is only normal to do everything you can to save it, no matter how difficult that might seem.

Even the most successful businesses can find themselves experiencing hard times, sometimes due to no fault of their own. If you’re currently experiencing difficulty, this article will assist you by presenting an overview of your options.

What is Commercial Insolvency?

Insolvency is a legal term which essentially means that your business or company is no longer able to repay its creditors and continue trading or if company liabilities exceed assets. Your business might be insolvent if;

  • You are suffering from cash flow insolvency and can’t make debt repayments as they arise.
  • You are suffering from balance sheet insolvency whereby the total of your business assets is surpassed by your liabilities.

What Are My Options for Recovering My Company?

You will usually have several possible options which you can pursue to either wind down your company or attempt to bring the company back on track. The options open to you are;

  • Administration

If your company enters administration, it will be protected from creditors trying to collect any debts you have outstanding. In addition, a third party will be brought in to manage the day to day running and trading of the company which is designed to ascertain just why it is failing and whether it can be saved.

The administrator appointed to your company will have the power to sell assets which are owned by the company if it is believed the proceeds could save the company from folding.

  • Liquidation

The process of liquidation involves transferring control of a company to a third-party liquidator – at which point the company will cease trading and all assets possessed by the company will be sold to pay any outstanding debts to creditors.

  • Company Voluntary Agreement

The option most likely to save your business is entering into a voluntary agreement with your creditors. The idea behind a CVA is that you will promise to make good on your debts in exchange for being given time to make repayments.

A CVA will normally form part of a business rescue package, and if overseen by an insolvency practitioner, will also include assistance with the management and restructuring of your company going forward. Michael Chamberlain business recovery professionals are one of many insolvency firms who could assist you with the rescue of your business. We would suggest contacting a suitable firm as soon as your business begins to encounter difficulty.

The Next Steps

It isn’t a good idea to bury your head in the sand as insolvency can have an impact on the financial security of a company’s directors depending on how the company has been structured. To avoid this possibility, never continue to trade once your company has entered into liquidation to avoid the potential for being sued for wrongful trading.

With sound advice and the right restructuring package, you may be able to save the company that you worked so hard to build.

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