Can a company recover from insolvency?

Can a company recover from insolvency? This is a common question for many business owners who find themselves facing financial challenges. Despite how it may seem, being insolvent doesn’t necessarily mean your business journey is at an end. There are several options available to potentially salvage your business.

Relieve the pressure from creditors, HMRC or your bank

A common cause of insolvency is a growing pile of debts to suppliers, the taxman or even on a loan. Without these parties, your businesses wouldn’t function. But sometimes making the payment on time or in full can be a challenge.

Assuming your business is viable but struggling, an important option to consider is negotiating informal arrangements with your creditors.

This can provide essential breathing space to allow the development of a recovery plan. Many would prefer for you to repay them over a fixed time rather than go into liquidation, as they’re more likely to be repaid when your business is open and able to trade.

You might also be able to arrange a repayment plan with HMRC. It operates the Time to Pay scheme, if you cannot pay your tax bill on time or in full. This allows you to spread out your tax-bill payments over a fixed period of time. And when it comes to your bank, if you’re able to show solid plans of how your business plans to recover from insolvency, your bank might offer you ways to consolidate and restructure your debts.

Making smaller repayments regularly will hopefully give you the relief you need to focus on your business’ growth and enable you to get back to profitability.

Work through some steps to recover profitability

Once you have a bit of breathing space, the first thing to do is get to grips with your cash flow. Your incoming and outgoing cash not matching a certain time of the month or year is one of the most common symptoms of a business in need of rescue. The key to finding a solution will be identifying the root causes of the cash flow symptoms.

Business rescue steps aim to secure the short-term position of your business. The first thing we do when working with a business to rescue it is to establish how much time your company has before business challenges and financial difficulties are beyond rescue. Once this timeline is established, we help you deal with your issues using a priority-based approach.

Business recovery has a more long-term outlook and looks at how you can change the use of the resources you have to maximise its productivity and ability to make a profit. Because managing the day-to-day operation of a business is full-on, it can be difficult to find the time to sit down and assess the strategic decisions of your business. This is where we step in to help you map out a way forward and deliver a solution that fits with your business’ objectives.

Using a formal insolvency process to recover your business

In the unfortunate event that your business is already insolvent, there are even some insolvency procedures that could rescue your business and recover it from its insolvent position. For example, a Company Voluntary Arrangement (CVA), which is similar to an informal repayment arrangement but made legally binding by a licensed insolvency practitioner. It offers a compromise to the creditors where you commit to pay off a percentage of your debt over a set period of time. This gives your business the respite it needs to stabilise. For a CVA to be accepted by your creditors, you’ll need to show a solid business plan, which is something else we can guide you through.

The aim of Company Administration is to rescue your business by selling some of its assets in order to pay back its creditors. Your business could continue trading throughout, depending on the circumstances. We might also be able to arrange for the sale of your business and its assets to a new company owned by the existing directors, shedding the debt and allowing you to have a fresh start.

Even liquidation doesn’t always mean the end of a business. Sometimes we can use a Creditors’ Voluntary Liquidation to help a business recover from insolvency. Your company would still enter liquidation so its assets can be sold to repay the creditors. It would also be formally closed. We can then guide you through the steps to take your business forward.

Can a company recover from insolvency? Yes!

When facing the seemingly overwhelming prospect of business insolvency, it’s crucial not to panic. Remember: insolvency doesn’t necessarily mean the end of the road for your business. With careful planning and professional assistance, your business may still recover from insolvency.

If you’re having trouble paying your debts, the first step is to contact us as soon as possible. As licensed insolvency practitioners and business rescue experts, we’re best placed to advise you on your options.

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