What is business recovery and insolvency?

The first objective of an insolvency practitioner will be to find potential ways to rescue your business, so that it can begin to trade profitably again. The actual steps which the insolvency practitioner will take will depend on the level of debt your company owes and the individual trading circumstances.

What exactly is business recovery?

If your business is struggling and is in danger of becoming insolvent, it is advisable to contact a licensed insolvency practitioner. When your business is facing financial difficulties, time is important. The sooner you contact a professional insolvency practitioners for advice, the more likely their team will be able to help.

They will be able to analyse your businesses situation and decide what is the best course of action to attempt a rescue. The circumstances surrounding every business are unique and a variety of business recovery actions may be available, including sourcing new funding and restructuring the businesses debts and available assets.

Renegotiating your company debts

If your company is experiencing a temporary setback which is unlikely to last for a long time, a Company Voluntary Arrangement (CVA) may be arranged. A CVA could aid recovery by offering a way out of further debt problems, by renegotiating existing debts.

While a CVA is in place creditors are unable to take further legal action and any potential interest charges are stopped. The CVA will be arranged for a set period of time and any debt which remains at the end of this period will be written off.

Company administration

An insolvency practitioner may decide that the best route to take is to formally enter the company into administration. The aim is to provide the insolvency team with time to decide the best course of action and advice. Following the temporary moratorium period, the administrator must either rescue the company, achieve a better result than if the business entered liquidation, or release company property to pay creditors.

Reducing operational costs

If a business is able to reduce its operational costs, it may be possible to avoid formal insolvency. This could include cutting costs such as advertising, stationery, staff training or pay freezes. The aim will be to streamline the company, so that it can begin to trade profitably again.

Insolvency and liquidation

Although insolvency practitioners will try to recover businesses wherever possible, sometimes their advice will point to liquidation. A creditors voluntary liquidation is used in situations where the directors choose to voluntarily wind up the business. Once a business is placed into voluntary liquidation, the directors need to prepare a statement of affairs. this document outlines the reasons for insolvency and is then sent to the various creditors. Following the voluntary liquidation, the assets are distributed to the various creditors,

In contrast, courts can order a compulsory liquidation following a creditor issuing a winding-up petition. This is the only way an unsecured creditor can start liquidation proceedings against a company.

Alternative finance options

Many businesses across Northern Ireland, Scotland, England and Wales are struggling due to the current economic situation, however a cash injection could help you avoid a serious recovery and insolvency situation. We can help you compare a range of finance options, including services such as invoice factoring and discounting, so that you can release the cash tied up in your business.

Alternatively, our comparison services extend to financial products such as business loans, business bank accounts and overdrafts, which could improve your cash flow enough to avoid a voluntary liquidation. For more advice about our financial comparison services, please contact our team today.

Kerry Fawcett