Tightened belts, lighter wallets, fewer customers. It’s a very difficult time to be a business owner in the UK. As the recession continues to bite, companies in every sector are feeling the squeeze; with income slowing from a gush to a trickle and banks closing their metaphorical doors, removing any chance of favourable borrowing terms. However, indebted companies do have a chance to recoup their losses. There are a number of business recovery mechanisms put in place to ensure that entrepreneurs are able to save their companies from the dreaded winding up order and subsequent involuntary liquidation.
Business Recovery Methods: How to Make Good on Your Debts
More and more frequently, companies are being subjected to winding up petitions, as creditors seek to hedge their bets in order to give themselves the best chance of survival. In fact, the biggest issuer of statutory demands and winding up petitions is the taxman – the Government is not exempt from the economic problems which are so dramatically affecting private enterprise. Fortunately, there are a raft of measures available to assist struggling businesses. The Company Voluntary Arrangement (CVA), similar to the IVA available to individuals, is one of the simplest ways to get your books in order.
A licensed insolvency practitioner will assess the business and its debts, and draw up a repayment plan, which will be presented to creditors. Provided that 75% of creditors agree to this plan, the company will be able to repay its debts at a manageable rate whilst continuing to trade under the control of its existing board and shareholders. The CVA is also attractive as it delays or removes the threat of further legal action against your company, whilst boosting your ability to escape onerous employment and lease contracts with no penalty.
Creating a Better Plan for the Future
Once your company is subject to a CVA, or even before this stage has been reached, it is sensible to revise your business plan. How did the company end up in its current position? Exterior economic forces are often an important factor, especially in present times, but the fact remains that your company has begun to sink whilst others are managing to stay afloat. Even for experienced directors, it can be prudent to obtain the advice of professional business recovery services. These experts can help you to identify every cost to be cut and saving to be made.
What if Your Company is Already Subject to a Winding up Petition?
If your have a court case pending, you’ll probably be feeling an immense amount of pressure. If you believe that a winding up order may be issued, there are still options for business recovery. It may be best to place your company into administration voluntarily, allowing it to continue trading under an administrator and giving the business more time to get a plan into action. Whilst in administration, the company can be sold or entered into a CVA, thus avoiding the costly liquidation that would result from the issuance of a winding up order.
Tom Omar is an insolvency practitioner and blogger. He has over 20 years’ experience in advising entrepreneurs on company debt issues.