My company is insolvent. What can I do?
If your company is insolvent, or you believe has financial difficulties and is facing the prospect of insolvency. You can consider the formal insolvency options below:
- Company Voluntary Arrangement (CVA).
- Administration.
- Creditors Voluntary Liquidation (CVL).
How to tell if your company is insolvent
If you’re unsure if your company is insolvent, there are ways to identify its solvent position, allowing you to take the action best for its situation.
- Check the company’s cash flow, and make sure it has enough funds to cover its bills as and when they fall due.
- Ensure the company’s liabilities don’t exceed the value of its assets on its balance sheet.
- Check for legal action from creditors, including County Court Judgments (CCJs).
More on how to determine if your company is solvent or insolvent
Company recovery options
If you find your company is insolvent, you should consider whether the business is viable and whether it has good prospects. If you think you can overcome the adversities currently holding your business back and wish to keep the company trading, there are options to consider.
- Time to Pay and informal arrangements
If your company is in short-term financial difficulties with HMRC, you may be able to reach an agreement if you approach them with an acceptable repayment scheme. A Time to Pay Arrangement is a type of informal agreement with HMRC, usually lasting six or twelve months, with the entire debt being repaid by the time of its conclusion.
More on Time to Pay Arrangements with HMRC - Raising finance
If your company’s core business is sound in structure but needs to raise or restructure its borrowings or other financial standings, your options could include:- Restructure existing finance.
- B2B businesses – invoice finance (this may be helpful if the issues were caused by rapid growth).
- Refinance plant, equipment, vehicles, etc.
- Commercial mortgage / re-mortgaging.
More commercial finance options
- Repay company debts through a Company Voluntary Arrangement (CVA)
A CVA is a formal repayment arrangement allowing you to consolidate your company’s unsecured debts and repay them monthly over five years. Any unsecured debts left at the end of the CVA are written off, and the company can continue to trade throughout the arrangement. You retain control of the company’s day-to-day operations. A financially troubled company can get back on its feet while paying back something to unsecured creditors, avoiding winding-up petitions.
We can assess your company’s financial situation and offer guidance on whether a CVA would be appropriate, completely free of charge.
More information about Company Voluntary Arrangements
- Restructure the company through administration
If the company’s core business model is sound, but historical debts are burdening the company, it could benefit more from restructuring.
Administration offers directors protection from creditor pressure while the insolvency practitioner restructures the company to attempt to rescue it as a going concern and return it to a profitable state, making it more appealing to potential buyers.
Speak with one of our experienced advisors who can advise if administration is suitable for your business model.
More information on administration
Company closure options
If the company is insolvent and it looks unlikely it will recover from its financial problems, contact us for advice on ceasing to trade. Doing so allows you to formally close the company in an orderly manner, avoids worsening your creditors position, putting a stop to all further legal action and ensuring your responsibilities as director are met.
- Close the company via a Creditors Voluntary Liquidation (CVL)
Sometimes, the company’s debt can be of such a level that company isn’t viable going forward, and the directors would be better off closing and walking away. In this case, the insolvency practitioner may suggest that the company enters Creditors Voluntary Liquidation (CVL). This closes the insolvent company and writes off its unsecured debts.
More details about Creditors Voluntary Liquidation - Close the company down and start again via a Pre-pack liquidation
In some cases, it may be possible to purchase assets from the liquidator and continue running the business in the name of a new limited company. This can be done through a pre-pack liquidation, a form of CVL, wherein a newly formed company purchases the old, insolvent company’s assets, and it is then liquidated.
More on pre-pack liquidation
How we can help
If you’re unsure which option would be best for your company, we can help you decide. Our advisors are friendly, understanding, and available to offer you free, non-obligatory initial advice, guidance, clarity, and direction.
- Speak with our initial advisers via phone or online chat. If we can help, we will arrange a free consultation with a consultant to further discuss your situation.
- During the consultation, we will advise which option would be best for your company.
- After your consultation, if there is an appropriate route forward, we will issue the relevant documentation to start a formal engagement.
We can provide the necessary expertise to advise you on which process would be best for your company.
In summary
You have several options if you find your company is insolvent. Which option you should take depends on your own assessment of the company. If continuing to trade is an option, it could enter a Company Voluntary Arrangement (CVA). If more substantial restructuring is required, then administration might be more appropriate. If the debts are of such a level that the company would be better off closing, then a Creditors Voluntary Liquidation (CVL) can put the company to bed.
Case Studies
Designer Recliners Limited
Kelly Burton • Manufacturing • Administration, Company Voluntary Arrangement (CVA)
A Sheffield furniture manufacturer and upholster has relaunched offering a smaller, more specialised range of products.
Anico Interiors Limited, which included reclining chairs for the elderly, had suffered cash flow problems and issues with profitability.
Designer Recliners Limited, managed by director Nick Wall, has purchased the assets and business of Anico saving all 11 jobs.
Andy Wood and Robert Dymond from Sheffield business turnaround experts Wilson Field were appointed joint liquidators on 8 June and advised on the sale of the 14-year-old company, based on Orgreave Crescent at Orgreave Industrial Estate, as a going concern.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Historically, the company offered a wide range of products but has now streamlined its offer to customers and cut out some unprofitable lines, as well as re-vamped its web site.
“Directors took advice from Wilson Field with the business sold to new company Designer Recliners Limited as a going concern, safeguarding all 11 employees’ jobs. The new company will offer the same service and standards under the same management team but focus on a smaller range of specialised products.”
The company employs skilled staff including upholsterers, seamstresses and cutters and was set up in 2002 by Nick Wall.
Aristocrat Pet Supplies
Kelly Burton • Retail • Administration
The business and assets belonging to a Sheffield online pet supplies company are up for sale. Aristocrat Pet Supplies, a family owned and run business, milled its own feed and seed on-site in Sheffield and has been trading for over 25 years selling agricultural raw materials, livestock, textile raw materials and semi-finished goods.
Sheffield-based insolvency specialists Wilson Field were called into the firm after it experienced increasing pressure and competition online. Andy Wood and Lisa Hogg were appointed as joint administrators for the company on January 26.
Wilson Field is trading the business in the short term with a view to finding a potential buyer for the company based on Holbrook Green Industrial Estate near Sheffield.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“The business has encountered increased competition in recent years, principally from discount stores which have reduced margins.
“It has been on the market for several months but has not attracted any significant interest so far. As administrators, Wilson Field is trading the business in the short term to maximise realisations on a reduced staff base of seven.”
Aristocrat, which employed 19 staff, offered a range of pet supplies including dog and cat treats, chews, small animal bedding, wild bird supplies, poultry and aquatic food.
Derwent Castings Limited
Kelly Burton • Metals • Creditors Voluntary Liquidation (CVL)
Unsecured creditors owed money by a Derbyshire manufacturing company which went into liquidation are to receive a higher than the expected dividend of 60p in the pound.
A total in excess of £128,000 is due to be distributed to unsecured creditors of Whatstandwell-based Derwent Castings Limited, whose claims totalled over £192,000.
The company, whose roots date back to the 1940s, had traded profitably for a number of years but in late 2013 / early 2014 saw the cancellation of its largest sales contract which represented 70 per cent of its turnover.
Bosses at the company, which employed 16 staff including three directors, struggled to attract replacement business and had to drop prices. Further business was lost as a result of foreign competition.
Sheffield’s insolvency specialist Wilson Field was called in as liquidator and worked with the creditors’ committee of Derwent Castings Limited to secure the positive dividend.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Dividends for insolvent companies are generally low, or nothing, for a variety of reasons – cost of staff redundancies, difficulty collecting outstanding invoices, selling assets in a forced sale situation, selling specialist assets which have limited appeal to purchasers, deteriorating or perishable assets, as well as other costs involved.
“However, thanks to a very positive relationship with the creditors committee, I am delighted to return a healthy dividend to the unsecured creditors in the region of 60p in the pound.
“The supply chain is often greatly affected by a liquidation and in this case we have been able to help creditors.”
Derwent Castings Limited was incorporated in August 2002 and specialised in iron casting from the five-acre Derwent Foundry site at Whatstandwell near Matlock.
However, the iron founding operation at Derwent Foundry was first introduced back in 1946 by Wragg & Hawksley which produced cast iron pipes for the water industry.
In 1950 the foundry was acquired by WH Davis & Sons Ltd to supply castings for their railway wagon building business. Following a management buy out in 1984, the company was renamed Derwent Foundry Ltd and following its closure in July 2002, was bought by its present owners and renamed Derwent Castings Ltd.
Amongst jobs carried out on site were moulding using loose pattern and modern air setting (boxless) sand systems; metals work using the latest in electric induction melting producing a wide range of grey, SG and alloy irons; an independent Namas approved test laboratory, finishing, pattern making and machining facilities.
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