Should we close down or fight on?
Your suppliers and creditors want you to succeed, in the interests of recovering the money they are owed but also to maintain an ongoing business relationship with you. The ultimate decision facing any business at the point of insolvency is whether to close down or continue trading. If your business has been seriously impacted by COVID-19, but you have every reason to believe it will be successful once life returns to a semblance of normality, then keeping the business open can be a viable path to follow. Given the proposed relaxation of the insolvency laws (detailed below), if you are inclined to trade your way back to solvency, there are two main options available:
Enter into an informal arrangement with your creditors
In the current climate, it is likely that creditors will be more understanding than ever. They know that if your business goes into administration, there is a real risk that they will not see much from the sale of assets. It is recommended that you speak to your suppliers as soon as possible to agree a mutually acceptable plan for repayment. An informal arrangement with creditors is not enforceable in law, so there is a risk that the agreement will not be fully complied with. You should take legal advice.
Enter into a formal Company Voluntary Arrangement (CVA) with your creditors
Relaxation of Insolvency Laws
Wrapping up a business
- managing employees through the process and respecting their rights
- dealing with any outstanding debts and liabilities
- how to share remaining assets with stakeholders
- closing down a limited company and appointing an administrator if required
It is critical to ensure that when closing a business, you do not just walk away and hope everything will sort itself out. This route is difficult for any business leader to work through, but a formal closing down process is important. You should seek legal advice if you are uncertain about any aspect of taking this option for your business.
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