Few people wake up and decide that today is a good day for an insolvency.
Faced with the prospect of your company’s impending failure, it’s natural to want to bury your head under the covers and leave the hard truths for another day. But by putting off the inevitable, you could be creating a whole new set of problems for you and your company and digging yourself into a deeper financial hole.
When it comes to insolvency, it can be a case of act fast or lose out.
The reality is that financial problems rarely go away by themselves, they merely multiply. Each day you postpone dealing with an insolvency equals more interest and charges on your debts, more creditors at your door and fewer resources with which to rescue your business or secure your own financial future.
The longer you wait to seek professional help, the worse the situation invariably becomes.
Keep calm and carry on might be your mantra, but it’s a terrible one for a company director. Ultimately, your working capital and savings will dwindle, your debts will mount and good money will be thrown after bad.
Worse yet, you could find the choice of when and how to close your business taken completely out of your hands. If your creditors take legal action against your company for its unpaid debts you may find yourself subject to a county court judgement, statutory demand or a winding up petition. You could even be forced into compulsory liquidation.
Once this happens, the options available to you will start to shrink, fast.
It is far better to grip the bull by the horns, take an honest look at your company’s financial situation and investigate the solutions that are available to you before it’s too late. You might be surprised by how many positive options there still are.
Everything from company restructuring, refinancing and debt consolidation is potentially on the cards. By delaying, you risk missing out on the opportunity to achieve the best outcome in the circumstances. Maybe even to rescue your company and bring it back into profitability.
Besides, whether you are ready to face up to it or not, if your company cannot afford to pay its debts or its liabilities outweigh its assets, it is already insolvent.
That means you now have legal obligations to your creditors and the cost of ignoring them can be harsh.
Simply continuing to operate your business as normal could mean you are committing wrongful trading, a civil offence which could result in you being held liable for your company’s debts or even disqualified from being a company director in the future.
This is just the first of many traps waiting for the unwary company director. Undercharging for your products could be considered transactions under value, and lead to personal liability. Even paying some of your debts could rebound on you, leading to accusations of giving preferential treatment to one creditor over another again potentially resulting in personal liability.
Insolvency can be a legal minefield and without a good insolvency practitioner to help you navigate it, you are almost guaranteed to fall foul of the strict rules governing how an insolvent company and its directors must act.
Over the years, I’ve helped hundreds of clients to jump the insolvency hurdles and land safely on the other side. Which is why I know that the legal challenges are just the tip of the iceberg. What worries me most of all is the emotional impact insolvency can have on the people going through it.
I understand better than most why it might be tempting to avoid the problems your company is facing. There are few things in this life more stressful than the prospect of financial ruin or losing a company you have dedicated years of time and energy into building.
Procrastination can make you feel better and less anxious, even if you know it’s only a temporary relief. But while you are ignoring the problem, it gets bigger and the worry doesn’t really go away. It just niggles at the back of your mind with the promise of a harder day tomorrow.
You may think you are putting off going insolvent. But chances are you are already there and the outcome may be inevitable. What you are really delaying is getting the help you need to see you through it. Remember, the sooner you act, the more options you have available and the better the outcome is likely to be.
There is no need for you to handle this alone.
