Insolvency Prevention

Build-up to a business entering into an insolvency procedure…..

As with anything in life nobody truly wants to fail, otherwise why start out in the first place. You would have to be extremely naive to believe that there was not an element of risk when starting out in any business, even if you did have the best business plan since sliced bread.

A business may be facing an insolvency procedure for a wide variety of reasons, some may have been in the control of the board and some may be beyond the control of the company and its directors.

Usually, it is not one catastrophic event that causes the failure of a business, although this does occur from time to time (i.e. major customer goes bust), but a multitude of events that tip the business over the edge (i.e. economic downturn, increase in costs, increased level of competition reducing margins, currency fluctuations, bad debts etc..).

Having a business plan and good financial reporting, assists the board in their management decisions and this can flag up any areas of concern that need to be monitored on a regular basis (Fail to plan, then plan to fail) to avoid the insolvency of the business and/or the restructuring of the business.

The decision process for the directors is extremely difficult as they have grown their business from incarnation to its current point.

Often directors find themselves firefighting putting out blazes across the business and dealing with mounting pressure from the company’s bankers, trade creditors, government departments (HMRC – Unpaid VAT, Unpaid PAYE) coupled with juggling to meet the payroll on a weekly or monthly basis, whilst paying the rent and dealing with the landlord.

During this period of pressure, the directors are often found injecting additional funds into the business and or robbing Peter to pay Paul. This period of turmoil can result in errors being made and the directors making themselves personally liable to a variety of claims to any subsequently appointed liquidator.

The earlier that directors facing financial challenges seek professional independent advice, the better as this may result in a successful business turnaround and prevent the directors putting themselves and their company and its creditors in a worse position.

If you think this could be you and your business, get in touch with one of our specialist team on 0800 009 6106 or hello@myinsolvency.co.uk

Insolvency Act 1986

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