Company payment plans
If your company finds itself struggling to cover its debts, there are a number of formal payment plans to help repay its liabilities. These arrangements work to allow you to continue trading, avoiding liquidation and providing creditors with a higher return than from the winding-up of the company.
When would I need a repayment plan?
Although many businesses encounter some form of debt in their operational lives, you may need to consider a repayment plan when the level of debt becomes so high that the company can’t pay them for lack of available funds.
Other reasons your company could benefit from a repayment plan:
- Your company would have the potential for profit if it wasn’t burdened by its debts.
- There’s no feasible way of paying off the debts through continued trade, or you risk trading whilst insolvent.
- You want to remain in control of the company while repaying its debts.
- You need to protect the company from creditor action, which may include bailiffs.
- You need a cost-effective solution to repay the debt.
What are my options?
If you’ve already tried an informal arrangement such as a Debt Management Plan, which has been unsuccessful, your best course of action could be a formal insolvency arrangement. Depending on what you want for the company’s future; you could close the doors and have the debts die with it or try to save it via a payment plan.
Company Voluntary Arrangement (CVA)
One of the most commonly used insolvency options for companies seeking a debt repayment method, a Company Voluntary Arrangement (CVA) allows a company to repay its debt in monthly instalments, at an affordable rate tailored to its circumstances. The monthly payment plan is often set for a period of up to five years; however, this may vary depending on the specifics of your arrangement, making CVAs one of the more flexible options available.
Read more about Company Voluntary Arrangements (CVAs)
Individual Voluntary Arrangement (IVA)
If you’re a sole trader and don’t operate through a limited company, an Individual Voluntary Arrangement (IVA) is a potential solution. These formal repayment plans are like CVAs and allow you to repay your debts in monthly instalments at a rate to suit you. IVAs can also be used for personal debts as an alternative to bankruptcy.
Both these voluntary arrangements are formal and legally-binding, and if you default on the repayments, they will fail, and you could suffer further creditor action.
More information about Individual Voluntary Arrangements (IVAs)
There are alternative arrangements available, should you require something more informal.
Time to Pay Arrangement to HMRC
If most of your debt is to HM Revenue and Customs (HMRC), then you could explore a Time to Pay Arrangement. These informal payment plans allow you to pay back outstanding amounts of corporation tax, PAYE, National Insurance and VAT to the tax office, typically over 12 months. HMRC needs to agree to the proposal before it can be actioned and may reject it if they doubt your ability to keep to the arrangement’s terms.
Alternative solutions
Occasionally, the company’s debt could be of such a severe level that a repayment plan won’t be enough, and more drastic action is required.
In these scenarios, you could consider administration; in which a licensed IP takes control of the company, assesses its financial situation and performs the necessary action to keep it operating, with the intent of guiding it out of the insolvent period and back into profitability.
More solutions for company recovery
In summary
Payment plans can be a lifeline for businesses suffering from a large amount of debt, that would otherwise close the company if left unchecked. Formal arrangements such as a Company Voluntary Arrangement (CVA) allow you to pay in monthly instalments tailored to what you can afford. A similar payment plan is available for sole traders; an Individual Voluntary Arrangement (IVA), as well as alternative plans which may be more suitable for your company depending on its circumstances.
How we can help
If your company is struggling to cover its liabilities, and creditors are pressuring you to repay what you don’t have, you should never bury your head in the sand. A repayment plan, such as a CVA might be the best option for you to free your company from its debt. For more information and to see whether a CVA would be appropriate for your circumstances, speak to us today. We have a team of advisors and licensed insolvency practitioners who can offer free, impartial advice with no obligation. They can assess your situation and advise whether a formal payment plan would be the best course of action, or whether an alternative arrangement would be more beneficial.
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.
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.
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