If you are looking for solutions for your company’s financial problems, you are not alone. Even though this is the probably first time you have had these problems, Carmichael & Co deals with them every day, and can usually put your mind at rest very quickly giving you appropriate advice. Whilst your creditors may not work late at night, if you want to call us use our out of hours number (0330 223 0965) which diverts to a senior person’s mobile phone, not a call centre, though it still costs the same as a local call. They can normally answer your questions as long as they are awake and their battery is not dead.
This page deals with the best solutions if your company has financial problems. If you have personal finance problems, please look here. Reading is just the first step – talking to us for specific advice is the next one, and we won’t charge you until we have worked out which of the solutions is best for you.
If someone owes you money and you have been contacted by the licensed insolvency practitioner acting for them, please look here.
We all know that sometimes, no matter how hard you try, things don’t go to plan. You may have done all your planning and come up with the best product ever, but if your competitor beats you to it or has a better advertising campaign the company may not be able to survive. In these circumstances, it is always best to take action as quickly as possible. If you do not, you may become personally liable for some of the debtors, and you may become disqualified from acting as a director in the future.
Having spoken to many directors over the years, we have learned that the main worry time is between realising that there is a problem, looking into the solutions available, then doing something about it. If your company cannot pay its debts (and there is no likelihood of trading out of it), you can either put it into liquidation or wait for someone else to do it.
We would usually suggest that you tell an Insolvency Practitioner to call meetings to put the company into Creditors Voluntary Liquidation. Whilst this is an informal meeting, legally it is done at a meeting of the Board of Directors, so they all need to know is happening. The Insolvency Practitioner will then write to the creditors to tell them that the company is having problems, and that you have decided to put it into liquidation. We suggest that you talk to the creditors (especially any to whom you have given personal guarantees), but by waiting until after they have been told officially they cannot easily do something to affect the other creditors. If you have asked us to help you, we will then prepare the reports and documents for those meetings and hopefully be able to deal with all questions the creditors might raise before they think of them themselves. About 3 weeks later, there are then meetings of the shareholders and creditors, at which a Liquidator is appointed. The Liquidator then sells the assets and after paying the costs pays a dividend to creditors if possible.
Company Voluntary Arrangement
Where the company has incurred debts because of a one-off specific event, such as a large bad debt or illness of a director, but it was making profits and you can see the light at the end of the tunnel, a Company Voluntary Arrangement (‘CVA’) may be the best way to save it.
By offering a CVA, the company can keep all the goodwill it has built up over the years. As with an IVA, the offers must be better than that which creditors would otherwise receive if the company went into liquidation.
In a CVA, the company offers a repayment plan to its creditors setting out what it is doing to turn the company around, usually with financial projections. These are checked on a regular basis by a Supervisor, who reports to the creditors, and makes payments to them on the company’s behalf. Usually creditors will accept a lower payment than they are really owed.
One of the benefits of a CVA is that even though it usually takes longer than a liquidation, the costs are about the same or lower since there are no formal investigations. The directors will, however, need to say that there were no issues as part of the proposal.
If part or all of the business is worth saving, but there is a reason why the company cannot spend a few weeks preparing a proposal to creditors it may be appropriate for the directors or shareholders to put the company into administration. An Insolvency Practitioner will then run the company and try to save as much of it as he or she can, though this can become expensive. If the company is unable to pay a creditor with a fixed charge (such as a mortgage or debenture to as bank), they will often appoint an Administrator instead of waiting for the director to do it.
Whilst it is quick and easy to put a company into administration, for the size of company we usually deal with we do not usually think it is worthwhile as it will always lead to one of the above options or the striking off of the company. Because of the costs involved, we tend to think it is better to miss out the ‘middle stage’.
Just to remind you, reading this page was just the first step – talking to us for specific advice is the next one, and we won’t charge you until we have worked out which of the solutions is best for you.