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 to 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 to 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 creditors’ position further and considered wrongful trading, which could lead to 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’s 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 7 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
Transcar Trading Limited
Kelly Burton • Automotive • Pre-Pack Administration
Advisors from Yorkshire’s Wilson Field have saved 12 jobs at a Darlington low load haulier after it was bought out of administration.
Transcar Trading Limited specialised in collecting and delivering motor vehicles nationwide with its main clientele including major car dealers Bristol Street Motors, Lookers and Knaresborough Vauxhall.
The company, which traded from rental premises at Lingfield House Darlington and Macklin Avenue, Billingham, called in administrators from Sheffield-headquartered Wilson Field to look into the ongoing viability of the company and advise on a turnaround strategy.
After set up in 2015, it had experienced rapid growth within the last 12 months of trading and, coupled with a number of uncollected and disputed invoices, had created cash flow pressures and a build-up of arrears to HMRC.
Kelly Burton and Lisa Hogg from Wilson Field were appointed as joint administrators on November 27 and concluded a pre-packaged sale of the business and assets to Transcar Logistics Limited – wholly owned and managed by one of the directors and shareholders of Transcar Trading.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field, said:
“As a result of the pre-packaged sale of the company’s business and assets to Transcar Logistics, 12 of the company’s 18 employees were transferred under TUPE, minimising preferential claims in wage arrears and accrued holiday pay.”
Valuations and advice on asset disposal was handled by Robert McArdle of David Currie & Co with legal services and advice from solicitors Ward Hadaway.
Mercer Group
Kelly Burton • Construction & Engineering • Pre-Pack Administration
All 38 jobs have been saved at a Bolton construction trade company after administrators at Wilson Field sold the company in a pre-pack deal to existing management.
Joint administrators Kelly Burton and Lisa Hogg from Wilson Field were called in by directors of Mercer Group on 7 July 2017.
The company, based at Turton House on Wellington Road in Bolton, had suffered due to serious underpayments from clients resulting in VAT and PAYE arrears and issues with HMRC.
Mercer Projects Ltd bought the company for an undisclosed sum with all 38 staff from across the group being transferred to the new company under TUPE.
As well as saving jobs, estimated redundancy and holiday pay totalling almost £97,000 were mitigated resulting in a better return to creditors.
Kelly Burton, director and insolvency practitioner at Wilson Field, said:
“We are pleased that the sale of the company to Mercer Projects has resulted in all 38 jobs being secured and that the business will continue to trade.
“We determined that a pre-packaged sale would be in the best interests of creditors.”
Director Alison Mercer said:
“This has been an uncertain and very difficult period for Mercer Group but advice from the administrators at Wilson Field has made the whole process less stressful. Their communication and procedure and working closely with them has meant we have been able to keep all 38 staff.
“With our strong reputation within the sector as a multi trade company and with the same staff team, we were confident that the company has a viable future.”
Alison added:
“It is very frustrating when events which are outside of your control threaten the very existence of your business and the jobs of a loyal workforce. Working with our advisors and staff, the future of Mercer Projects now looks very positive and we are in a position to offer our customers the same high quality of products and service.”
The companies began as Mercer Brothers Limited in 2004 and D Mercer and Sons Ltd in 2009 as plastering only businesses and quickly evolved through training and business expansion into a multi-trade company, to become known as Mercer Group.
During a period of quadruple growth between 2012 and 2013, the company relocated its offices to Bolton and undertook work in both the public and private sectors including residential, educational, medical and commercial properties.
Areas of expertise included demolition, plastering, screeding, tiling, flooring, joinery, painting and decorating, structural and ground works and roofing.
It also worked in partnership with a number of local colleges and schools to provide apprenticeship schemes for 16-24 year olds to gain experience, skills and qualifications in the construction industry. Mercer Projects has continued to provide apprenticeships and currently has 4 apprentices who are working on our construction sites.
Gosschalks Solicitors of Hull advised and dealt with legal work with asset sales through Ian Maycock of Charterfields Surveyors in Manchester.
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