On 0121 233 4333 or request a callback
Company Insolvency
Insolvency is a critical issue that can affect any business, regardless of size or industry. Understanding the signs of insolvency and knowing how to respond is crucial for protecting your business and its stakeholders. At Wilkes, we offer expert guidance and support to help businesses navigate the complexities of insolvency with the aim of achieving the best possible outcomes.
What is Business Insolvency
Business insolvency occurs when a company is unable to pay its debts as they fall due or when its liabilities exceed its assets. This financial distress can arise from various factors, including poor cash flow management, declining sales, increased costs, or economic downturns.
Types of Insolvency:
- Cash Flow Insolvency: This occurs when a business cannot meet its debt obligations as they fall due, even if its assets exceed its liabilities.
- Balance Sheet Insolvency: This happens when a business’s liabilities exceed its assets, indicating that it owes more than it owns.
Recognising the signs of insolvency early can help you take proactive measures to address the situation. Key indicators include:
- Persistent cash flow problems
- Difficulty paying creditors on time
- Increased borrowing to meet operational costs
- Falling behind on tax payments
- Creditors threatening legal action
- Suppliers requiring cash on delivery
Speak to a lawyer today
Steps to Take if Your Business is Insolvent
Assess the Situation- Conduct a thorough review of your financial position. Identify the extent of your debts, assets, and cash flow challenges. Understanding the root cause of the insolvency is essential for determining the best course of action.
Seek Professional Advice- Engage with insolvency professionals who can provide expert advice tailored to your situation. Your own accountants will be of significant help with this exercise. At Wilkes, our team of experienced advisors can help you explore your options and develop a strategy to address your financial difficulties.
Consider Restructuring- In some cases, restructuring the business may provide a viable solution. This could involve renegotiating terms with creditors, reducing operational costs, or divesting non-core assets. Our team can assist you in developing and implementing a restructuring plan.
Insolvency Procedures
If restructuring is not feasible, formal insolvency procedures may be necessary. These include:
- Company Voluntary Arrangement (CVA): A CVA is a legally binding agreement between a business and its creditors to repay debts over a specified period either in full or in part. It allows the business to continue trading while addressing its financial obligations.
- Administration: Placing the company into administration provides temporary protection from creditors while a licensed insolvency practitioner seeks to restructure the business or sell its assets to repay creditors. This exercise frequently results in the sale of the business as a going concern maximising returns for creditors and saving jobs.
- Liquidation: This involves winding up the company and selling its assets to repay creditors. Liquidation can be voluntary (initiated by the company) or compulsory (initiated by creditors through a court order). Where a winding up petition has been presented against your company and the company bank account has been frozen you may be able to seek a Validation Order from the Court authorising certain payments and dispositions by the company during the period up to the hearing of the winding up petition hearing.
Maintain transparent and open communication with your stakeholders, including employees, creditors, financiers and suppliers. Keeping them informed about the steps you are taking to address the insolvency can help manage relationships and build trust.
Meet the team
Consultant, Business Recovery
Partner, Business Recovery
Partner, Business Recovery
Partner, Business Recovery
Senior Associate, Business Recovery
Solicitor, Business Recovery
Solicitor, Business Recovery
Insolvency Executive, Business Recovery
Featured news and case studies
