The earlier that you face the reality of an impending insolvency and take advice the more options you will have. You may not have to be declared bankrupt or forced into liquidation if you do not want to be.
Insolvency Options for Limited Companies and Limited Liability Partnerships
The number of options open to you depends on how soon you deal with the impending insolvency and how viable your business is in a new shape or form.
If you are certain that it is not viable to continue and you want to close or do not wish to carry on but there is perhaps someone else that does or you want to be given time to pay and carry on then there are three main options:
- Liquidation – Which means deciding to put the company into liquidation with the help of a licensed insolvency practitioner who will act as liquidator
- Administration – Which means getting the business protected by a Court order whilst it is wound down or sold to a new owner
- A company voluntary arrangement (“CVA”) where a proposal is put to creditors to freeze the debt and a three to five year period is usually agreed in order to repay only part of the debt
If there is no money available at all to close the business then you may need to ask a supplier if they want to push you into compulsory liquidation( (as it is at no cost to you) but often directors want to avoid this route. Of course if you cannot pay a supplier, even if you don’t want to go into liquidation they can force you into it.
Insolvency options for Sole Traders and Partnerships
Again, the earlier you realise that serious financial problems are coming the more options and control you will have over the outcome.
The options for sole traders or partnerships are:
- If you don’t want to carry on or there is not a viable business then usually it means bankruptcy However, where there are only a small number of creditors a deal can be reached to part settle and write off the balance of debts
- If you want to carry on, then negotiate early and agree a ‘time to pay’ plan with creditors such as suppliers, HM Revenue and Customs and the bank or consider an individual or partnership voluntary arrangement (“IVA” or “PVA”).
- If you cannot pay suppliers and just ignore them they are very likely to make you bankrupt or in the case of a partnership force it into liquidation.
“The earlier you face the reality of an impending insolvency and take advice the more options you will have.”
As experienced licensed insolvency practitioners we can help your business through a Creditors Voluntary Liquidation. Contact us today for a free consultation.