Coronavirus (COVID-19) and your business
As you’ll probably know, Coronavirus (COVID-19) has swept the world, putting countries in lockdown and forcing people with symptoms to self-isolate. With restrictions being placed on movement and business’ operating hours, the virus is likely to have at least some impact, however large or small, on your business.
What precautions should I take?
During this period, business owners should consider action to delay the spread of the virus. This action could include whether your staff should work from home, if you need to impose restrictions on opening hours, the amount of products people can purchase, or if the government has imposed a new restriction that directly affects your company. This responsibility extends to the business’ financial position, and if you notice things are getting to a point where the business is suffering, you should consider your options should the worst happen, and the business becomes insolvent.
What if my business starts to suffer?
Fortunately, if your business does start to suffer, and finds itself struggling to cover liabilities for virus-related reasons or otherwise, there are options available to help.
Company Voluntary Arrangement (CVA)
Company Voluntary Arrangements (CVAs) are formal repayment plans for companies, allowing them to repay their debts at a rate they can afford over five years. These arrangements are most effective if the business structure is viable, but the company is struggling to stay on top of its debts. It also allows the company to continue trading through the process, meaning trading should remain unaffected.
Administration
If the issue is more serious, and the company would benefit from more substantial restructuring, then administration may be a more suitable option. An insolvency practitioner takes control of the company and makes the changes necessary for its survival. Doing so may include selling off parts of the business deemed unprofitable or making staff redundant.
More information about administration
Creditors Voluntary Liquidation (CVL)
Sometimes, the debt can be of such a level that the company cannot recover. In which case, you may be better off liquidating the company via a Creditors Voluntary Liquidation (CVL). An insolvency practitioner will take control of the company and ensure the closure occurs in an orderly manner. All staff will be made redundant, and the assets sold off. Although having to close your company may not be pleasant, doing so via a CVL is still favourable to having your creditors apply for a winding-up petition and forcing the company into compulsory liquidation.
Personal finances
COVID-19’s financial effects aren’t confined to limited companies, and you could find your personal finances are also affected. This can be problematic if you’re a self-employed sole trader and your only source of income has been knocked by the virus’ effects.
Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement (IVA) is similar to a CVA but designed for individuals struggling with personal and sole trader debt. Individuals pay back what they can afford over a period of five years, and at the end of the arrangement, all remaining debt is written off.
In summary
The Coronavirus (COVID-19) has already had a damaging effect on the world, and businesses are likely to suffer as a result. As a company’s director, you should take the necessary precautions to ensure your business addresses the issues in a suitable manner. This includes tackling any financial repercussions. If the worst should happen and the pressures start pushing your company into insolvency, there are several arrangements which you can apply for. Which of these will suit you best will depend on you and your business’ circumstances.
If your business or personal finances have taken a hit, and you need free impartial advice with no obligation, contact one of our initial advisors, and we can help set you on the path best suited for you.