What to do if you are facing insolvency
If you run a business and are in a position where you cannot pay your debts, staff or company directors are not being paid, or if the business has debts worth more than the assets you hold, your business is deemed to be insolvent.
While this may be an extremely worrying time, you need to be aware of what this situation means to you and your business. One of the first things that may happen is compulsory liquidation. This is where the court orders insolvency through a winding-up order, which usually starts when one of your creditors applies to the court to say that your company is unable to pay money owed to them and that they want to commence wind-up procedures.
If you owe your creditors money and you cannot pay, they can commence wind-up procedures even if you have no assets or if you do not agree with the amount you owe. If your business is insolvent and you are liable for your business debts, there is a likelihood that you may be at risk of becoming personally insolvent. To protect your personal assets, you should discuss your options with a specialist chartered accountant like Berley to see what options are open to you.
You may be able to incorporate your business into a Limited Liability Partnership (LLP) or Limited Liability Company (LLC), which will restrict your exposure and prevent you from becoming insolvent.
Taking steps to adopt better credit control will help to improve your cash flow and mean that you have money in the bank to cover any debts you have. Many businesses have money owed to them, but become insolvent due to bad debts and poor payers. You could also try to sell any stock or assets that you own in order to improve your cash flow.
You could try to secure a loan or convince investors to put money into the business short term until your cash flow stabilises. If you act quickly, before you are put in a position where your business is put into compulsory liquidation, your business has a far better chance of surviving.
Talk through your options with Berley
Dealing with insolvency alone can be scary. Berley are licensed insolvency practitioners who understand businesses. We can work with you to assess your situation and offer tailored advice and support to help you through this tough and stressful time.
For more information on insolvency and how we can help you to minimise the impact, call our insolvency team on 020 7788 8261 today.