Do I Need an Insolvency Practitioner

22 February 2024

Insolvency practitioners do far more than wind up failed businesses – they can also help save them. Enlisting their services could be a crucial first step towards restoring your company’s fortunes. The question is, how do you know when the time is right?

We’ve put together a list of signs to watch out for, to help you decide.

Your relationship with your suppliers is breaking down

Strong supplier relationships are built on trust. If your company has been forced due to cash flow issues into late or missed payments then this could earn it a reputation as unreliable. This could cost you preferential rates or services that your business depends on, such as flexible terms and faster turnaround, and exacerbate your company’s financial troubles.

A good insolvency practitioner can help you to restore trust by mediating an honest and frank dialogue between you and your suppliers and negotiating a fair solution for you both.

You have rental arrears on your business properties

This is another sign that your company is on the verge of insolvency. Depending on the nature of your business, eviction from your premises could make it impossible for you to continue trading. Thankfully, there are many options available to you to prevent this from happening. Seeking the right advice and support is key.

HMRC are threatening action against you

HMRC have become increasingly aggressive in their enforcement and collection practices of late and any threats they make against you need to be taken seriously. Remember, HMRC has the power to force your business into compulsory liquidation to recoup any money you owe them – a power they are using more than ever.

If you are in debt to HMRC you must act swiftly and decisively to ensure that they do not file a legal order against you with the High Court, known as a winding-up petition. These can be issued against you very quickly, and with little warning, and could result in the closure of your company.

One option is to agree a Time To Pay agreement, but these are becoming much more difficult to secure. You will need a strong business recovery plan in place to convince HMRC your company can afford to repay what it owes. This is something an insolvency practitioner can help you create. They can also manage the negotiations to get you the best terms.

You are behind on paying wages

Failing to pay your employees can create myriad legal issues for your company. It will also likely leave you without the workforce you need to continue trading, dissuading new staff from joining your company at the same time as dissatisfied experienced employees leave to find more reliable jobs.

A reputation as a bad employer can also have a devastating effect on your brand, damaging your customers perception of you for years to come. If your cashflow problems have reached this point, it is time to seek professional advice.

You can’t make your government loan repayments

Many companies who took out a Bounce Back or Coronavirus Business Interruption loan during the Covid outbreak are now struggling to repay them. What at the time seemed like a temporary interruption to normal business operations, has become a long-term economic decline, and many companies have never recovered their pre-pandemic profitability.

There are a range of restructuring and refinancing options available to you. Some, like spreading your repayments over a longer period or negotiating a payment holiday can be put in place while you continue to trade. Other, more comprehensive solutions will require declaring your company insolvent. An insolvency practitioner can advise you on the best course of action.

Your creditors have taken legal action against you

These may take several forms – a county court judgement, a statutory demand or the employment of a debt recovery agency. While the severity and legal implications of these differ, they are indicative of the same problem. Your company’s creditors no longer believe it is capable, or willing, to repay the money it owes them.

It is important to act now before the situation deteriorates further and you are forced into liquidation. One possible recourse is for an insolvency professional to negotiate a moratorium for you, which places a stay on any legal action while you explore your options with a view to attempting to rescue the company. Depending on how far proceedings have gone, they may also be able to negotiate more affordable repayment plans with your creditors.

Rumours are swirling about your industry – and they aren’t good

Bad press or online whispers that your industry is in dire straits can make it difficult for you to trade your way out of financial challenges. You may need to convince your customers, suppliers, and creditors that you have the means to buck the trend – that your company’s unique selling points will help it to thrive, even as its competitors fail. A strong business plan, based on sound professional advice, can help you do this.

If your company is showing the signs of pending insolvency, then it is time to enlist the services of a professional. They can help you understand all your options, from restructuring and refinancing to voluntary arrangements, administration, and liquidation. That way, you can move forwards in the most financially secure position possible.