The UK economy is in a fragile state as the impact of Covid-19 continues to bite, and many companies will be left reeling for some time to come.
Some company directors have had little choice but to borrow money courtesy of Government schemes, both in the form of bounce back loans and the furlough scheme, just to survive.
As we emerge from another lockdown, many directors are concerned that they cannot hang on for much longer.
For any company having serious cashflow problems and debts which it cannot pay back, then John Bell, the director and founder of licensed insolvency firm Clarke Bell, urges you to take control of your situation and get professional help as soon as possible.
For struggling companies with little or no chance of survival, a Creditors’ Voluntary Liquidation (CVL) is often the best course of action to deal with the business debts and fulfil your legal obligations as a company director.
What is a Creditors’ Voluntary Liquidation?
If your company is struggling to keep its head above water and you have decided that it might be best to cut your losses and close down your company, then a Creditors’ Voluntary Liquidation (CVL) might be the best option. Liquidating your company voluntarily via this method, rather than a compulsory liquidation, is the best way of protecting your business reputation in the long run.
First and foremost, you should contact a licensed insolvency practitioner for some free and confidential advice to see if a CVL is the best option for you and your company. They will tell you if there is a better option for your particular situation.
If a CVL is the right solution, the insolvency practitioner will work with you and your accountant (where applicable) to collect all the necessary information to proceed with the liquidation. They will seek to gather a full list of your creditors, along with copies of your company accounts. As soon as the CVL process starts, your company will need to stop trading.
Your insolvency practitioner will lead you through the process step by step – including all the necessary paperwork, the board meeting and members’ meeting (both of which are normally held online).
Doing nothing is not an option when you are the director of a company which is facing financial difficulties – especially since, as a company director, you have a legal duty to do something about it.
It is important that you seek professional help to navigate the route that is best for you and your business. A CVL might not be the best option and an insolvency practitioner will discuss the alternatives with you.
In some cases, it might be possible to get the business re-started using a combination of an insolvency process and new finance. Other options include the lighter touch of a Company Voluntary Arrangement (CVA).
The sooner you get professional advice, the more options you are likely to have open to you. Most firms of Insolvency Practitioners will give you free and confidential initial advice. So, you really have nothing to lose by speaking to one.
A lot of company directors wish they had spoken to an Insolvency Practitioner a lot sooner than they did – as it would have stopped them putting ‘good money after bad’ and avoided months of unnecessary stress and sleepless nights.
About the author
John Bell is Director of insolvency firm Clarke Bell, which he founded in 1994.
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