Write off company debt and start again
If your company is suffering from cash flow issues and is in debt, it is possible to write off those company debts and start again. Whether doing so involves repaying the company’s debts, restructuring the company, or closing it, what actions are available depends on the level of company debt and whether it would be viable without those debts.
Can you write off a company’s debts?
Depending on your company’s circumstances and your vision for its future, you may be able to write off your company’s debts. There could be several options to consider, including a voluntary repayment arrangement, voluntary liquidation, or pre-pack administration.
If you want to close a company and walk away or continue the business in a new limited company, contact us without delay. The sooner you act, the better your chances of preventing the insolvency from escalating and diminishing your chances of being held personally liable for your company’s debts.
Company recovery options
If your company has a valid business model that could be profitable without its debts, it may be possible to keep the company open while it repays its liabilities, and several procedures allow you to write off your company’s debts without having to close.
More about company recovery options
- Continuing to trade with a voluntary repayment arrangement
Before deciding that closing your company and starting again is the best route, you should consider whether the company would be viable without its debts. If that’s the case, you could consider trading through and repaying the debts in one affordable monthly sum via a Company Voluntary Arrangement (CVA).- CVAs are voluntary repayment arrangements and generally last for about five years. They can conclude beforehand if the debts are fully repaid, giving a return to creditors and allowing the company to return to profitability.
- Providing the company adheres to the terms of the CVA, at the end of the term, any remaining debt is written off.
- You retain total control of running the business without the interference of outside parties while you write off your company’s debts.
Closing or restarting the company
Sometimes, a company can have so much debt that the benefits of closing it down and starting again can outweigh those of continuing to trade. There are procedures to help you close your company, and again, your circumstances will dictate which one is best suited for you.
Read more about company closure options
- Closing through a voluntary liquidation
Liquidating your company via a Creditors’ Voluntary Liquidation (CVL) could be the best option for those wanting to walk away. Any assets your company owns are realised and used to repay its creditors. The company then closes, ceasing to exist, along with its debts. Afterwards, the former directors are free to start a business in something completely different or find employment elsewhere.
More information on Creditors’ Voluntary Liquidation
Trade through a new company or repurchase the assets and start again
Depending on your circumstances, it may be possible to repurchase the insolvent company’s assets at market value and continue the business in a new limited company.
This can be achieved through a ‘pre-pack administration’ process.
- Your company’s assets are sold at market value, usually by an administrator, either back to you and the existing management team or to an unrelated party.
- A ‘newco’ carries on the business while the ‘oldco’ ceases to exist, its old debts dying with it.
In some cases, this can be achieved without the company going through the administration process, through what’s informally referred to as ‘pre-pack liquidation’.
Before exploring this option, it is important to consider the difference between a business and a company.
- A business is an activity undertaken by a company – services and products which bring in revenue.
- A company is a legal entity or vehicle through which the business operates.
After a liquidation, there is no reason why a business cannot go on if its model is viable, but it must trade under a new name and cannot be similar to its predecessor. Only in unique circumstances can a company reuse the same name as the ‘oldco’.
Can company debt affect your personal finances?
Thanks to a limited company’s limited liability protection, the company is a separate legal entity from you. This protects you from personally incurring financial burdens as a result of your company’s insolvency.
However, company debt may affect a director’s personal finances in other ways. This could be because you’ve injected money into the company from your personal accounts to keep the company going. Or, more simply, your primary source of income has been your failing business, which has left you short of money and unable to pay your own personal liabilities.
Additionally, you may have signed a personal guarantee to help the company – for example, a guarantee to a bank in support of company borrowing or a landlord relating to a company lease.
How we can help
We can assess your situation and advise you on the best route forward, free of charge. If you want to close a company and walk away, or move assets from a current company into a new limited entity, contact us without delay. The sooner you act, the better your chances of preventing the company’s insolvency from escalating, reducing the chances of you being held personally liable for your company debts.
- Speak with our initial advisers via phone or online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth.
- During the consultation, we will advise which route out of administration is most appropriate, or if there are alternative options available.
- After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.
In summary
You can write off company debt and start again through one of several procedures. Each situation is unique, so it is essential to take advice before you reach a decision. It may be possible to write off your company’s debts and allow trading to continue, but it could be more appropriate to close the company down and start again in a new company unburdened by the debts of the old company.
Case Studies
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 20 February and concluded a pre-packaged sale of the business and assets for an undisclosed sum to ARB Motors Limited, led 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.
Precision Engineering Business
Kelly Burton • Construction & Engineering • Administration
A bespoke precision engineering business, working predominantly in the automotive and aeronautical sectors, found itself experiencing cash flow difficulties caused by an increase in costs due to the uncertainties surrounding Brexit, and the loss of a key member of the sales team.
When the company’s largest customer reduced its spending by 50%, the director felt the business couldn’t continue and sought advice from the team at Wilson Field.
Wilson Field marketed the business and assets for sale, and a sale of the tangible assets was completed immediately following the administrators’ appointment, to an unconnected third party.
Kelly Burton, insolvency practitioner and director at Wilson Field, said:
“With so many complications surrounding Brexit, coupled with the loss of some key staff, the company experienced some cash flow difficulties it could not get out of.
There was a positive outcome in the end as some of the tangible assets within the company were sold, which meant a good return for creditors.”
L’Etranger
Kelly Burton • Leisure & Hospitality • Pre-Pack Administration
Administrators from Wilson Field have worked with bosses at a London restaurant to serve up a rescue deal. Kelly Burton and Lisa Hogg were appointed joint administrators on 10 July to South Kensington-based L’Etranger Restaurant.
Established in 2002, the Gloucester Road restaurant, located near the Royal Albert Hall and London’s Museum Quarter, including the Victoria and Albert Museum, the Natural History Museum and Science Museum, had been trading as L’Etranger Restaurant since 2010 benefiting from the prime location for visitors and theatre-goers.
However, the company sustained a significant loss following the sale of a second restaurant in 2014 and experienced mounting cash flow issues with its retained premises resulting in HMRC arrears and the threat of a winding up petition.
Keane Hart Ltd, a company owned and managed by existing management team lead by director Ibi Issolah, has acquired the business out of administration for an undisclosed sum.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field, said:
“L’Etranger had suffered losses in the past few years due to the previous loss-making sale of a second premises. Funds were spent on L’Etranger which absorbed further cash flow accruing HMRC arrears and the company being threatened with a winding-up petition.
“The restructuring process has resulted in the continuation of a viable restaurant and the safeguarding of all the employees and ensures that the business is financially secure for future trading.
“Five jobs have been saved and transferred under TUPE to the new company.”
L’Etranger serves Japanese-influenced French cuisine, as well as maki and sashimi alongside offering a world-class wine selection. It has been awarded a number of accolades including an AA Rosette for Best Wine List in the UK 2013.
As well as seating 80 diners in the restaurant, L’Etranger offers wine tasting, private dining and events for up to 100 people on its premises.
Shulmans in Leeds advised and dealt with legal matters with Robert McArdle of David Currie & Co in Manchester assisting with asset valuation and disposal.
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