I can’t afford to pay my suppliers
Few businesses can say they’ve never experienced cash flow problems. Late payment from a debtor, technical issues which grind business to a halt, client cancellations or a sudden unforeseen drop in demand can cause problems. Most companies have temporarily experienced these or something similar. If, however, cash flow troubles have been recurring for you and you’ve suddenly found yourself unable to pay your suppliers, you might be seeing final demand letters through your letterbox. Keep in mind at this point that it is better that you take action yourself rather than a supplier taking action against you.
What options should I consider?
In times of difficulties such as an incapacity to pay suppliers, you should contact us to establish whether your business is viable, or whether tough decisions need to be made to put debt to bed and ensure your actions aren’t brought into question. We can help you every step of the way no matter what path you choose to go down.
Financing through the storm
One of the first options to consider is commercial financing. The type of financing you use will depend on the type and structure of your business. One of our friendly advisors can provide guidance on whether your company would benefit from any of the options listed, and get you the best quote among the top providers, all completely free of charge.
Formal payment arrangements (CVAs)
If your company has the prospect of returning to profit, a Company Voluntary Arrangement (CVA) may be the best route for you to take. It involves consolidating your unsecured business debt into one monthly payment which is affordable and allows the company to stabilise itself. It usually lasts for 60 months and is often a better return for creditors than a compulsory liquidation.
More information about Company Voluntary Arrangements
Terminating the business (CVL)
If it is unlikely that the company would recover, or if you would like to wash your hands of the company, a Creditors Voluntary Liquidation (CVL) may be more suitable. It involves the liquidation of the company’s assets to pay creditors and closing the doors of the company for good. There may be an opportunity to purchase assets from the liquidator, at market value, if you have ambitions to continue running the business in the name of a new company.
More information about Creditors Voluntary Liquidation
Selling on (pre-pack)
A pre-pack administration would be the ideal procedure if you wished to buy back the business and assets and continue trading. It is used when a business model is workable, but the company itself is in too much debt to continue trading. The sale is generally agreed in advance of the appointment of administrators in conjunction with agents’ advice on the best way to market the assets, and if appropriate, the sale takes place immediately upon appointment. This allows a seamless transfer of the business, usually but not always, to the same management team and owners. A phoenix company can rise in its place, preserving jobs, giving a better return to creditors and giving directors a fresh start. With our guidance, you can effectively purchase back your business and make a success of it the second time around.
Should I stop trading?
If your debts outweigh your assets and you don’t have the resources to pay suppliers, you are insolvent, and we strongly advise that you contact us immediately.
More information about company closure
It is in your best interests that you cease to trade so that you don’t run the risk of committing the civil offence of wrongful trading, or more seriously, the criminal offence of fraudulent trading. Both are offences under the Insolvency Act 1986 and the Companies Act 2006. Here’s what else you need to know about them:
Wrongful trading
Directors have a duty to be aware of their company’s financial situation at all times. Therefore, they are obligated to inform shareholders if and when insolvency occurs and to seek help from an insolvency practitioner like Wilson Field. Creditors should also be notified and an attempt to make alternative payment arrangements be made. Continuing to trade will be seen as worsening your creditor’s position further and is considered wrongful trading. Associated with a judgment of this is a potential disqualification for up to 15 years, along with other penalties and financial fines.
Read more about wrongful trading
Fraudulent trading
Fraudulent trading means that a director is considered to have deliberately acted to avoid paying company liabilities. Such an allegation can lead to a prison sentence alongside director disqualification and fines. Selling off company assets prior to liquidation or taking credit, knowing it cannot be repaid are fraudulent actions and have serious consequences.
Read more about fraudulent trading
In summary
If you cannot afford to pay suppliers, there are financial solutions available to help your business out of trouble. However, it is only worth putting more money into the company if it can genuinely continue to trade once creditor pressure has been relieved. There are formal payment plans available, but once again, these should only be put into practice if the company has a viable chance of success. The alternative would be to liquidate the company. If you continue to trade, with the knowledge that you cannot pay your suppliers, it could be classed as trading while insolvent, or fraudulent trading.
How we can help
If you’re worried about being able to pay your supplier or are unsure about the best ways to move your company forward, it’s important to get in touch as soon as possible. Depending on your company circumstances, we can help you find the best route forward and work on what will suit your business best, whether it is through finance, or closing the company. We operate nationwide and offer a free face-to-face consultation.
Insolvency solutions
Experiencing an insolvent period can be a stressful time for anyone. While the issue may be short-term, it can be indicative of more significant problems at a deeper level. If you’re concerned about business debt putting you into insolvency, we can offer a range of solutions tailored to fit your circumstances.
Help for limited companies
Depending on the level of debt in the company, it may be possible to continue trading while you pay back what you owe. Whether this is possible can largely depend on whether the core business could be viable without the debt. A Company Voluntary Arrangement allows you to repay your creditors in monthly instalments tailored to what you can afford, all while staying in control of the business. Other solutions are available if your debt is to HMRC, or if the company requires more restructuring through a third-party to stay operational.
More recovery options for limited companies
Case Studies
LCP Pattern Book Makers
Kelly Burton • Manufacturing • Pre-Pack Administration
All 63 jobs at an Ilkeston company, which can trace its history back over a hundred years, have been saved following a pre-packaged sale. The original business operated by LCP Pattern Book Makers Ltd, which trades as Lee Colourplan Pattern Book Makers, started life in 1909 in the North of England, moving to Derbyshire in 1970.
Licensed insolvency practitioners Kelly Burton and Lisa Hogg both of Yorkshire-based insolvency specialists Wilson Field were appointed as Joint Administrators on 7th August 2017. The business and assets have been sold for an undisclosed sum to GB Patterns Ltd, a company managed by Gareth Bolsover, a former director of LCP Pattern Book Makers.
Kelly Burton, director and insolvency practitioner at Wilson Field said;
“The company enjoyed profitable trading in recent years but 2017 saw a 10% fall in turnover which created cash flow problems. This resulted in arrears with rent, HMRC and other suppliers.”
“GB Patterns Ltd bought the company with all 63 staff being transferred to the new company under TUPE. As well as saving jobs, the pre-packaged sale has mitigated employee termination claims estimated to total £414,018, resulting in a significantly better return to creditors”.
Kelly further commented;
“It is always good to see long-established businesses survive after facing difficulties. In this case with continued financial support from Regency Factors plc, we were able to work with all other parties to reach an outcome which would be in the best interests of creditors and at the same time preserve the business.”
Gareth Bolsover, owner of GB Patterns said;
“This has been an uncertain and very difficult period for the business but the continued financial support from Regency and advice from the administrators at Wilson Field has made the whole process less stressful. Working closely with them has meant we have been able to keep all 63 staff. The future now looks very positive.”
“With our strong reputation within our niche sector and with the same staff team, we are confident that the company has a viable future and is able to offer our customers the same high quality of products and service.”
The business will continue to trade from premises at Crompton Road, Ilkeston, specialising in the manufacture of fabric, wall/floor covering sample books, swatches, PVCU and cardboard binders, on behalf of manufacturing clients, including Colefax & Fowler and Laura Ashley.
Mark Wilkinson of Shulmans LLP, solicitors of Leeds advised and dealt with legal work with asset sales through Robert McArdle of David Currie & Co
Silcox Coach Company
Kelly Burton • Automotive • Company Voluntary Arrangement (CVA)
Pembrokeshire-based Silcox Coach Company, which operates school transport as well as local bus services, has been placed into administration today.
Despite attempts by administrators from Sheffield-based Wilson Field to secure a buyer with various interested parties, the 134-year-old company, which operated a fleet of 65 coaches and buses from its base in Pembroke Dock, has now ceased trading.
Insolvency practitioners Kelly Burton and Joanne Wright from Wilson Field Limited were appointed by shareholders after the company experienced financial difficulties and as a result all 92 staff jobs have been made redundant.
However, in the region of 50 staff have been re-employed by Edwards Coaches of Pontypridd who have been granted the local authority contracts previously operated by Silcox.
Kelly Burton, director and insolvency practitioner at Wilson Field said:
“Silcox Coaches was a fourth generation bus and coach operator and over the years provided various forms of transport services latterly focussing local authority community bus routes, school services, coach hire and coaching holidays.
“The company had an excellent reputation within the industry, the local community and its clients. Initially there were a number of parties interested in buying the business and assets and we had hoped to save all the jobs of the loyal workforce. Sadly, despite our best efforts none of these came to fruition. On the positive side, Edwards Coaches of Pontypridd have re-employed approximately 50 of those staff.”
As well as office accommodation in Pembroke Dock, Silcox also occupied a small travel office in Tenby and a large bus and coach compound near the offices in Pembroke Dock.
Edwards Coaches is the largest family owned coach company in Wales employing over 500 staff and operating 260 vehicles. It currently operates National Express coaches from Haverfordwest departing daily to Cardiff, Heathrow, Gatwick London and various other destinations plus transportation for over 8000 students to school or college each day from bus depots all over South Wales.
It also operates coach holidays for 80,000 passengers a year across the UK and Europe and operates The Edwards’ Red Dragon coach which is the official carrier of the Wales Rugby Team.
Travellers who have booked and pre-paid for a holiday with Silcox may be entitled to a refund and should contact either Bonded Coach Holidays (BCH) e-mail: bch@cpt-uk.org or The Confederation of Passenger Holidays UK (CPT) Tel: 020 7240 3131.
Scottish Pub Chain
Kelly Burton • Leisure & Hospitality • Pre-Pack Administration
The director initially approached Wilson Field for assistance with the drafting of a Company Voluntary Arrangement (CVA), following HMRCs refusal to allow the company a time to pay agreement. Wilson Field drafted a CVA proposal, which was rejected by HMRC, who then issued a winding-up petition.
Wilson Field then advised the director to his remaining options, of which placing the company into Administration was one.
Due to the petition, the director was unable to appoint administrators. However, following protracted discussions with the company’s debenture holder, it was agreed that the secured creditor would appoint Wilson Field, at the request of the director.
Insolvency practitioner and director at Wilson Field, Kelly Burton, said:
“After being refused a CVA by HMRC, the company received a winding-up petition and we were appointed Administrators after speaking with the debenture holder.
Although it was a tricky start, there was a good outcome as the assets and business were sold and 75 employees kept their jobs.”
A licence to occupy was granted to an associated company to trade the pubs, whilst a sale could be finalised post appointment.
The sale was completed to an associated party a number of months after appointment, and secured over 75 jobs.
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