Don’t give up! Rescue your business

If your business gets into financial difficulties, by law you need to decide early whether to stop trading. Of course, the best scenario is that, with appropriate help brought in early you can turn your business around and restore it to solvency. However if ending the company is the only option, the sooner you close a non-viable business, the better it is for your creditors and, ultimately, for you.

Key Steps to help rescue your company

The will to change

To successfully rebuild your business, you must firstly be willing to make changes and accept help from professionals. On average, it can take 18 months to rescue a business so you must have long term commitment.

Select a professional advisor

It's a good idea to get advice from a professional advisor with everyday experience of managing a company in difficulties. Each core function of your businesses will be reviewed to help identify  problems – Strategy, Finance, Sales & Marketing, Process and People. Whilst looking at your business in detail an advisor will ultimately focus on two things – making your company profitable and keeping you focussed on the rescue plan.

Accurate Accounts

A professional advisor will want accurate and up to date accounts if they are to form any view. If you do not have these this will be an absolute priority. Often this may be the root cause of the difficulties.

Identify the cause of the problem

This may be an endemic problem in the business such as underfunded, overstaffed, financially out of control or current economic situation, a loss of a major client or clients failing to pay you.

Keep board members informed

Hold regular board meetings and minute them to make clear that you recognise the situation, that you are taking steps to remedy it, the reasons for any decisions and your short-term strategy to see you through the crisis.

Improve your cash collection

Set daily targets, building to weekly results, which you must deliver to improve your cash position. Rework your cash forecasts on a daily basis, and predict where the gaps will fall. Move or renegotiate payments and discuss with your bank. With a good relationship behind you, they may be willing to help.

Involve your stakeholders

A supplier with whom you have a good relationship may be sympathetic if you ask for more time to pay a bill. Senior, trusted employees might agree to defer taking all or part of their salary. Fellow directors must be the first to drop their salaries if your employees are asked.

Evaluate potential savings

Savings such as overhead or staff cost reduction can produce longer-term results. However staff reduction savings will take at least a month before you feel the benefit and may even cost you money in the short term. You also need to be careful not to damage the longer-term prospects of the business if it does survive the crisis.

Take Action Early

It may not be the end of your business if you can't pay a bill or two but you must not bury your head in the sand either. These things can happen, even to the best of businesses. Recognise this and call in a specialist business advisor as soon as you start to get into financial trouble.

If any of this applies to your business please call our partner company, CMC Partnership on 01491 829181 or email him at derek.allen@cmc-partners.co.uk to talk over your options and maybe get further help. Visit CMC website at www.cmc-partners.co.uk

Company Liquidation FAQ's

Q1.  What is Company Liquidation?

A: It is a formal insolvency appointment called ‘Creditor’s Voluntary Liquidation’ in accordance with the Insolvency Act 1986.

It is used to ‘Wind Up’ the affairs of an insolvent company which has or is likely to cease trading.

Q2. Who is a Licensed Insolvency Practitioner or Liquidator?

A: A Licensed Insolvency Practitioner is a professional regulated to act on the administration of insolvent companies. Jennison’s Insolvency Practitioners are authorised by the Institute of Chartered Accountants in England and Wales (ICAEW).

A Liquidator is the name given to an Insolvency Practitioner who manages the Liquidation process.

Q3. How can I start the Company Liquidation process?

A: It is a voluntary process commenced by the board of directors, who hold a meeting to resolve that the company is insolvent.

A Licensed Insolvency Practitioner will assist the directors to call a meeting of shareholders and creditors.

Q4. What happens at the Shareholders and Creditors’ meetings?

A: At the shareholders meeting, at least 75% of all shareholders must resolve to place the company into liquidation and a Liquidator is appointed. The company enters into liquidation at this point.

At the creditors’ meeting, the creditors resolve on the shareholders’ choice of Liquidator. 50% of creditors who vote by value must approve the choice of Liquidator or they may seek to appoint a different Liquidator of their choice.

Q5. What happens next?

A: The Liquidator takes control of the company and its assets. A number of reports and statutory forms are completed including a report on the director’s conduct.

All assets are realised for the benefit of the company’s creditors i.e. a debenture holder, preferential creditors such as employee claims, unsecured trade creditors or HMRC, with monies distributed to creditors through a dividend.

Q6. Can I buy back company assets?

A: Yes, the director’s can make an offer to buy back assets of a company in Liquidation.

Q7. How long does the Company Liquidation process last?

A: It depends on the amount of assets to sell and paperwork required, but generally between 4 – 12 months.

Q8. What are my responsibilities as a director?

A: Directors have a duty to both the company and to assist the Liquidator throughout the process. All books and records must be passed to the Liquidator on appointment.

Q9. Can I set up another company with the same name?

 A: Yes, but there are certain conditions that must be fulfilled in accordance with section 216 and 217 Insolvency Act 1986. Jennison will help you through this process.

Q10. Can I be appointed as a director of another company if my company is in liquidation?

A: Yes. This is not a problem.

Advice to Directors 

It’s crucial that the financial pressures you are facing are not ignored, reacting early can help protect both your individual and business' best interests, seeking professional advice from qualified professionals can assist you in tackling your concerns and maximising the options available to you.

If you would like to have a free no obligation chat with one of our advisers please call 0800 107 8788

Jennison are Business Recovery advisors providing services to small and medium sized businesses including HMRC Time to Pay schemes, Company Liquidation and general advice.  

http://www.jennisoninsolvency.co.uk/