Although a company liquidation procedure might be the first response a director might think of when they are experiencing insolvent trading conditions, it is not the only option.
In fact, there are plenty of things that company directors ought to look into before they decide that liquidation is the right way to proceed. Of course, liquidating a business that can no longer generate profits or deal with an extended period of cash flow difficulties might be the best option but it should also be regarded as the final step – not the first. This is because many companies that face trading difficulties in 2022 can and will be saved so long as expert assistance is sought.
Read on to find out more about the sort of business rescue services available in the UK today.
Bounce Back Loan Management
Many British firms took out bounce back loans during the pandemic. This was the result of a government-backed scheme that meant lenders were only too willing to provide financial assistance to companies affected by the various periods of lockdown that were imposed on the country. The problem is that otherwise solvent firms are now sometimes facing the difficulty of servicing their bounce back loan debt while continuing to trade.
According to one business rescue service provider, Salient Insolvency, numerous company directors – including many financial directors – aren’t aware of how such debt can be restructured if the right approach is taken with the lender. Equally, steps like company restructuring can mean that the seemingly impossible task of paying back a bounce back loan becomes much more viable, especially if a little more time to settle it can be negotiated.
Time to Pay Arrangements
Negotiating with creditors who have government backing is one thing, but companies will often face trickier situations if they are in debt with HMRC. Late payments of corporation tax and income tax deductions from company payrolls are often the cause of severe financial stress on companies and, sometimes, the tax office can seem very final in the way it demands payments.
However, time to pay arrangements can be sought from HMRC, a key business rescue service that professionals in insolvency practice will often offer. There again, if you need time to pay commercial creditors, such as your suppliers, then a company voluntary arrangement (CVA) may be the best way of allowing for greater leeway and, therefore, saving the firm from legal action against it.
Pre-Pack Administration Proceedings
Appointing an administrator to officially run a company that is under financial stress is something that a board of directors can choose to do. Unfortunately, this will necessarily mean forfeiting some of the control that directors might want to retain. If this is the case, then a pre-pack administration proceeding may be the best alternative option to help rescue the business.
Under the pre-pack administration system, companies can arrange to sell their assets to a preferred buyer before official administration is sought. This is a potential route for a company to be sold to a third-party or trade buyer who can help save the firm and to keep it going in the interests of its creditors and employees.