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
Oldham Precision
Kelly Burton • Construction & Engineering • Administration
Machining engineers Oldham Precision has been bought out of administration saving all 12 jobs.
The company’s principal activity was the sub-contracting manufacture of large volume batch precision machined components for clients across a wide range of industries including aerospace, paper converting, printing, coatings, electronics and valve construction.
Administrators Kelly Burton and Lisa Hogg from Sheffield business turnaround experts Wilson Field were appointed joint administrators on 17 January after the company suffered cash flow problems.
Originally established in 1982, the company, based at Red Rose Business Park on Shaw Rd in Royton, offered subcontract engineering including CNC milling, grinding and turning.
After advice from Wilson Field, the business was sold to the existing management team as a going concern saving all 12 employees’ jobs.
Kelly Burton, director in the Leeds office at Wilson Field said;
“Following discussions with the director, the business was sold as a going concern, safeguarding all 12 employees’ jobs and offering a better return for the company’s creditors than alternative options.
“The new company will be under the same management offering the same standards of service to its customers.”
ARB (Sound Vision Light Power) Limited
Kelly Burton • Leisure & Hospitality • Administration
Wilson Field has secured a new future for a Banbury headquartered events management company, which boasted clients including Crufts, Tour of Britain and Virgin London Marathon after it was bought out of administration.
ARB (Sound Vision Light Power) Limited was established in September 2014 and specialised in event hire including providing audio visual solutions equipment, hire and installation.
The company, which traded from Coton Cottage, Chacombe near Banbury, called in administrators from Sheffield-headquartered Wilson Field for formal insolvency advice.
The company, which has an impressive client list and relied solely on sub-contractors as and when needed, suffered VAT and HMRC issues as a result of a period of illness.
Kelly Burton and Lisa Hogg from Wilson Field were appointed as joint administrators on February 20 and concluded a pre-packaged sale of the business and assets for an undisclosed sum to ARB Motors Limited, lead by the same management team.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said:
Wilson Field was brought in to look at the situation of the business.
The focus on the company had diluted during a period of illness of one of the two directors. A debt was due to HMRC and a repayment proposal was rejected resulting in the need to protect the business and assets via a formal insolvency procedure.
The pre-packaged sale means the business, which was an established player in event management at large scale events, has a bright future moving forward.
The loss of a major employee’s input through illness can harm an organisation and it is important for businesses to seek help should this arise. Timing is essential to keep focus on the business.
ARB has combined experience of more than 100 years and provided hire equipment such as indoor and outdoor PA systems, single and double-decker commentary units, street sound vehicles, exhibition TVs, stage lighting and mobile power in both primary and secondary distribution.
Berks Healthcare Services Limited
Kelly Burton • Healthcare • Administration
Wilson Field has advised on the sale of a Slough-nursing agency which was bought out of administration saving all 7 jobs.
Berks Healthcare Services Limited, which traded as Enchor Healthcare Services, specialised in providing healthcare professionals for the public and private sector.
It supplied registered general and mental health nursing staff, together with unqualified support and ancillary staff, to private hospitals and care homes in the areas local to the company’s offices in Slough, Portsmouth, Birmingham and Luton.
The company, headed up by healthcare professionals, called in administrators from Wilson Field after suffering from a fall in turnover, which left it struggling to meet unsustainable historic legacy debt. It had also been issued a winding-up petition from HMRC.
Kelly Burton and Emma Bower were appointed as joint administrators on 14 June 2018 and concluded the sale of the business and assets for an undisclosed sum to an unconnected company Connect Care & Support Limited, also based in Slough.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said: “The company had a turnover in the region of £2.9m per annum in 2017. However this is a very competitive marketplace, which is primarily price driven and recent minimum wage legislation changes had also impacted on the company’s potential profit margins.
“As administrators, we sought a purchaser for the business.
“This pre-packaged sale to Connect Care & Support Ltd saved seven permanent jobs as well as numerous temporary agency staff.
“It has also mitigated employee termination claims in the nature of wage arrears, accrued holiday pay, redundancy and pay in lieu of notice estimated to total £29,576 as the liabilities have transferred to the successor business under the TUPE regulations.
“This means the business has a new future moving forward.”
Berks Healthcare Services Ltd was incorporated in January 2015, but can be traced back to February 2007. Enchor Health Care was recognised and registered as Recruitment Consultants providing both permanent & temporary staffing solutions to many different Health and Social Care settings. It also had supported living and rehabilitation centres.
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