deal with company insolvency

5 Valuable Tips To Deal With Company Insolvency

No company wants to become insolvent, but running a business carefully can be tough, and sometimes things do not work properly as the businessman wants. But, this is not the time to give up, as the company’s insolvency does not bring an end to the career and even an end to the business. Rather there are various valuable tips to consider while dealing with the company’s insolvency.

Before we learn about these tips, let us know what insolvency is. A company’s insolvency is when the business cannot pay its liabilities or bills. Therefore, the company must keep a close look at its books. According to the Insolvency Act 1986, the insolvency of the business is measured by these factors listed below-

• Balance Sheet
• Cash Flow
• Statutory Demand

So, if your business is insolvent, it is also placed in the insolvency register and public records of companies. Here are several tips that can be explored to deal with the company’s insolvency. These ways are valuable in identifying the right cause for the insolvency and taking the correct steps to save the business and get back to your position.

1. Negotiate with the creditors

If the company is not able to pay the creditors, then rather than building pressure, try to contact the creditors to have an informal agreement for repayment that will help you overcome the struggle of debt.

Talking to creditors is not an easy task always, but ask them to give you the required time to pay the debt rather than taking any legal action against the company.

2. Get a voluntary company arrangement (CVA)

A company voluntary agreement is a formal agreement between the insolvent company and the creditors. The company uses the CVA to pay creditors over a fixed period. A CVA usually lasts for five years. The company voluntary agreement is only agreed upon when 75% of the creditors accept the proposal. The company can trade and repay its debts after the agreement is acknowledged.

The company can work the same as before without letting the customers and clients know about the business insolvency and the company’s voluntary agreement.

3. Offer prices with discounts for immediate payment

Cash flow problems are an early warning sign of business insolvency. And, if your business is dealing with cash flow issues, then there is a need for money. One of the ways to do so is by reducing the payment duration. Some businesses offer payment for 30 days, but sometimes it increases to 90 days.

And, if you are also concerned about the payment speed, then offer discounts to the customers who pay invoices on receipt or even make the advance payment. Offering a discount of 5 to 10% to the customers will be a sign of early payment from them. Make sure that the discounted amount is affordable for the company, which will be a win-win for both you and your customers.

4. Consult a lawyer

When you are facing insolvency of your company, it is essential to consult a lawyer to find out certain measures that can help in rebuilding. Remember that it is legal to work, so hire the right one for your case. Clear all your doubts along with possible solutions with the lawyer and let them work accordingly to take your company out from being dissolved.

Also, be honest with your lawyer, and give them all the related necessary information. The lawyer should know everything in advance rather than getting surprised later.

And, if you do not know where to ask for help, we suggest you choose one from a strong team of hickey lawyers that will assist you regarding the company’s insolvency.

5. Keep the company in administration

Putting the company into administration means your company can continue even after insolvency and is put under the management of Licensed Insolvency Practitioner. There will be an administrator who will take charge of the company and its assets.

The only catch is that the company will have to pay a certain fee to enter the administration. During the period of administration, there is no legal action that has to be faced until the contract is over.

Conclusion

These are the ways that can help you deal with the company’s insolvency. We suggest you go ahead with the option that best meets your situation. Make sure to discuss with your lawyer too before finalizing any.

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