Managing cash flow is a challenge for most businesses. Under perfect conditions, money received from customers as payment for products or services is used to promptly repay creditors.
However, this rarely happens and the process becomes a constant juggling act.
During the toughest of times, which many businesses have experienced in recent years, it can be extremely difficult to repay creditors.
After repeated repayment demands from creditors result in failed repayment, a company may find itself looking at insolvency.
We can help entrepreneurs who believe that insolvency is a realistic possibility. Taking no action can have severe consequences.
It is better to address the issue as soon as a corporate performance decline is identified.
The Effect of Insolvency on a Small Business
If you are a sole trader or one partner in a business partnership, a corporate insolvency could result in your bankruptcy, which prohibits the business from continuing to trade. This is because with sole trader and unlimited partnership entities, your personal liability for business debts is unlimited. In the worst situation, you would be required to sell personal assets and use the proceeds to repay creditors. With the proper debt advice, you can avoid insolvency and continue to trade.
Addressing Small Business Insolvency Concerns
We have experts skilled in small business debt solutions. These professionals conduct a comprehensive review of the business to determine appropriate debt solutions that permit trade to continue. Our advice is free and the debt solutions we propose are designed to address your cash flow issues, preventing insolvency and helping your company become debt-free in a short time.
The Effect of Insolvency on a Limited Company
If you are a limited company director, insolvency has a different impact than it does on a sole trader or partner in an unlimited partnership. Legally, your liability for business debts is limited. This means that you most likely will not have to sell personal assets to repay business creditors, unless the corporate debt is personally guaranteed by you.
However, if you permit trade to continue when the company is insolvent and has no way of repaying its creditors, you may be held personally liable for a portion of the corporate debts. If your business enters administrative receivership or insolvent liquidation, the administrator, receiver, or liquidator will review the actions you took as director.
If this party deems that you have behaved negligently, you may be prohibited from serving as a director for a company for as long as 15 years. This is a heavy price to pay for an issue that can be addressed.
Addressing Limited Company Insolvency Concerns
We recommend our free, no-obligation consultation and company review if your limited company is struggling with debt or you believe it may be facing insolvency. Before making a decision regarding trading, contact us to get a complete review of the situation and how it affects the business and you as director.
Our experts will present the debt management solutions available and help you decide which one is best.
Here is a sampling of the debt solutions we may propose:
- Informal Arrangement—a repayment agreement that you arrange directly with company creditors without third party involvement
- Company Voluntary Arrangement—a repayment plan consisting of agreed-upon reduced payments to creditors while the business continues to trade
- Administration Order—insolvency procedure that permits the company to continue trading, typically creating a more positive outcome for business creditors than does liquidation
- Liquidation—the company is closed, corporate assets are sold to repay creditors, liquidation fees, and expenses, with any money remaining divided amongst shareholders