Insolvency is a reality for many businesses; though, actions can be taken to salvage the business before resorting to liquidation.
There are four main options to be considered if your business can’t pay its debts.
1.) An informal agreement with your creditors.
To prevent legal action, an informal agreement as soon as possible can stop issues from escalating; this is a good course of action for minor difficulties.
Ensure you understand the additional costs or interests that may be required when a new repayment plan is suggested.
2.) A Company Voluntary Agreement (CVA) with the business creditors.
Alternatively, a CVA is legally binding, allowing the business to continue while repaying its debt.
3.) Put your business under administration.
This can help to protect yourself from the actions of your creditors, allowing you to sell the business to a new owner or continue trading.
Your business will be handed over to an insolvency practitioner who acts at the administrator and protects you from legal action from creditors.
They are also able to draw up proposals to save the business.
4.) Consider liquidating your business’s assets and repaying your creditors. This would mean closing the business.
This process would be handled by a liquidator, who will cease operation, make employees redundant and redistribute funds to creditors.
If your business is drowning in debt, and receiving threats from creditors, professional advice can be the best step forward.
They will be able to provide valuable information on how you can avoid compulsory liquidation and help you deal with your creditors.