From a sudden loss of clients to unexpected cash flow issues, there’s a variety of reasons why you may need to seek out professional help in the form of a licensed insolvency practitioner. However, when your company is going through financial turmoil, it’s not always easy to see when exactly you should seek expert help.
You may be tempted to try and trade your way out of financial difficulty. However, the sooner you appoint expert help from an experienced insolvency practitioner, the better.
You also need to consider the issue of wrongful trading. If you don’t stop trading immediately after you become aware that the company is insolvent, then you could be open to allegations of wrongful trading should you liquidate at a later date. This can also lead to disqualification, and personal liability for some or all of your company’s debts.
How to determine if your company is insolvent
When your company is no longer able to pay its bills, such as National Insurance and VAT payments, employee wages and any money owed to suppliers etc; these are clear warning signs of cash flow insolvency.
When you company’s cash flow problems are preventing you from paying bills and liabilities on time, it may be insolvent. Also, your company could be ‘balance sheet insolvent’, which is when the total liabilities exceed the value of its assets. The amount the company owes to any creditors should not amount to more than the value of its assets, including any money currently in the bank.
If you suspect that you are or are likely to become insolvent, you must stop trading and put the interests of your creditors first. When cash flow problems get out of control, it’s best to speak to a licenced insolvency practitioner as soon as possible.
How can an insolvency practitioner help you?
An insolvency practitioner will be able to fully analyse your company’s affairs to determine the extent of the problem. If appropriate, they will look at possible ways of refinancing or restructuring your company, in order to try and rescue the business. They will offer expert guidance on the best route for you to take, which could include:
- a Creditors’ Voluntary Liquidation (CVL) from just £2,995 (all inclusive)
- a Company Voluntary Arrangement (CVA), which would end all legal action from creditors against you, meaning things like winding up petitions cannot be instigated
- a pre-pack administration.
Even if your company is experiencing temporary cash flow concerns, an insolvency practitioner can still provide valuable input and guidance, including how to improve cash flow and getting alternative funding.
If you don’t get professional help soon enough, you run the risk of your company being forced into liquidation. Creditors who are owed £750 or more from you will also be entitled to issue a winding up petition against your company, which could result in the company being forced into liquidation.
When one creditor takes action, it’s likely that others will soon follow suit, and before long the mounting pressures could be overwhelming. HMRC will pursue late payments and often use winding up petitions in order to recover tax that is owed.
An insolvency practitioner can also help you with a solvent liquidation
An insolvency practitioner can also help you close down your solvent company through a Members’ Voluntary Liquidation (MVL).
If the assets of the company are over £25,000 an MVL is the most tax-efficient option for you to take, as with an MVL any funds to be distributed are subject to Capital Gains Tax, rather than Income Tax. You could also benefit from Entrepreneur’s Relief (ER), which gives you a 10% marginal rate on distributions.
How we can help you
At Clarke Bell, our dedicated and highly experienced insolvency practitioners will work with you to establish the best solution for you and your company.
When you appoint us, you can be assured that you will get a friendly and professional service – at an affordable price.