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
ET Rowlands & Sons
Kelly Burton • Automotive • Administration
Assets from the well-known Telford road haulage contractor ET Rowlands & Sons, which has closed after nearly 60 years in business, are to be sold by auction online.
The firm, known for its striking red livery on its vehicles, provided road transport solutions for UK and continental Europe and operated a modern mixed fleet of rigid vehicles, tractor units and trailers.
Last week’s closure of the company, set up in 1958 by 87-year-old current director Mary Rowland’s father, saw all 28 jobs made redundant after the company lost a major contract and potential hopes for a pre-pack sale were dashed.
Kelly Burton and Lisa Hogg from Yorkshire-based insolvency specialists Wilson Field were appointed joint administrators of ET Rowlands and Sons on 13 June at a meeting of members and creditors.
Wilson Field has instructed valuers and asset management consultants Charterfields to dispose of the assets of the company, which operated a warehouse facility in Telford.
Vehicles and other items up for sale include a fleet of 14 tractor units, seven rigid and flat HGVs by Scania, DAF and MAN, 14 curtainside and three flat back trailers, personalised numberplates including P7 ETR, P12 ETR, R4 ETR, S7 ETR, T2 ETR, V2 ETR, and 6 ETR, plant and office furniture. Other vehicles include a Vauxhall Movano 3.5T Dropside and Ford Transit T350 Panel Van.
Kelly Burton, director and insolvency practitioner at Wilson Field, said: “ET Rowlands & Sons was a well-established family-run business that experienced loss of a major contract.
“The director came to Wilson Field for advice but regrettably the company entered administration and has been closed. As a consequence all 28 jobs have been lost. It is always sad to see a long-standing company go out of business with the loss of jobs.”
The online auction is now open and closes Tuesday July 4 from 12 noon. For further details visit www.charterfields.com
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.
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.
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