Taking a business through a period of financial difficulty can be incredibly stressful. You’ll find yourself facing demands from a number of potentially angry parties, asking when you’ll be able to pay wages or repay debts. Luckily, insolvency isn’t something that you need to navigate all alone, and it’s crucial that you get advice from the right people. We’ve decided to break down what that process might look like, to help you navigate it as easily as possible.
Insolvency indicators
There will likely be some initial signs that you can spot yourself, that indicate whether your company is insolvent or not. In basic terms, your company will be considered insolvent if its debts outweigh its assets and income; this kind of situation will typically be one that emerges gradually, rather than all of a sudden, making it difficult to spot.
If you see any common signs of insolvency, such as being unable to pay bills or wages on time or receiving messages from creditors, then it’s worth conducting a simple balance sheet or cash flow test. This shouldn’t take long, and at the very least, will mean that you have a better basic overview of the state of your business financially.
Seeking initial advice from an insolvency practitioner
If you believe that you will imminently face insolvency, or if your company is already insolvent, then you will need to seek advice from an insolvency practitioner as soon as possible. An insolvency practitioner from a reputable firm will be able to provide you with an initial consultation, letting you know what path will be best given your specific situation.
In many situations where a company is insolvent, unfortunately, you won’t be the one who gets to make all the decisions. You will likely need to go through a process that involves the relevant creditors as well, to come to a collective decision over which course to take.
Acting quickly
Once you’ve received advice from an insolvency practitioner, it’s imperative that you act quickly on that information. Many courses of action will only be available for a limited time frame, especially those that don’t involve winding up your company and selling off all the assets.
Potential options going forward might include going through a member’s voluntary liquidation, going into administration, or entering into a company voluntary arrangement (a CVA). Each of these options comes with a range of benefits and drawbacks, and you’ll want to do thorough research to make sure that you pick the best one for you.
Other parties
In addition to insolvency practitioners, you’ll likely also need to work with an accountant and potentially a solicitor as well. You’ll want to make sure that you’re fully aware of any laws or regulations that you might have broken, so that you can limit any damage going forward and start to work on a legal defence.
Insolvency is never going to be an easy issue to deal with, but it really is something that needs to be handled sooner rather than later. By reaching out for advice from the right people early on, you can make things substantially easier for yourself in the long run.
