Help and advice for company debt problems
When you cannot make the payments on your company’s business debts, finance agreements, or any other contractual liabilities, this should be taken as a huge warning sign that all is not well with your company’s cash flow and general financial position.
What you need to remember, however, is that just because your company is currently experiencing problems with paying its debts, does not mean that it is doomed to fail. As long as you take action to solve the issues at an early stage, there are a number of options which can help get the business back on a solid financial footing.
What action can creditors take against my company if it cannot pay its debts?
If you fail to keep up with the repayments on your company’s debts, you should expect your creditors – those you owe money to – to take steps to get you to pay.
This can range from reminder letters, emails, and phone calls, through to threats of legal action should payment remain unpaid for a significant length of time.
In the most serious situations, a creditor does have the power to petition the courts to ask that your company is forcibly shut down and liquidated. This is done through the issuing of a Winding Up Petition. If you are unable to successfully defend the petition, by either repaying your debts or disputing the creditors claims, then your company will be placed into Compulsory Liquidation by order of the courts.
What should I do if my company cannot afford to pay its debts?
If your company is not in a position to pay its debts, you should take action as soon as you become aware of this fact. Contacting your creditors ahead of time to warn them that you will be unable to pay is likely to be taken better than missing payments without warning.
Depending on the level of debts your company has, the relationship with your creditors, and the scale of the financial problems your company is facing, you may be able to enter into negotiations with those you owe money to in order to arrange a mutually agreeable repayment plan.
If you believe your company’s cash flow problems are going to be long-lasting or run deeper than just the occasional missed payment, you should contact a licensed insolvency practitioner to better understand your options for formal restructuring and/or refinancing options.
How can an insolvency practitioner help my company in debt?
When a limited company becomes insolvent – meaning it cannot pay its debts and other liabilities as and when they fall due – its directors have a number of legal responsibilities towards its creditors.
One of these is to ensure creditor interests are prioritised from the moment it becomes clear the company is insolvent. This means directors should not engage in any activity which could expose creditors to suffer any further losses. In some cases this will mean stopping trading immediately in order to protect creditors and preserve company assets.
The assistance of a licensed insolvency practitioner is vital during times of company insolvency. Not only can an insolvency practitioner help you adhere to your legal duties as the director of an insolvent company, but they are also able to help you understand your options for both formal and informal restructuring options.
These could include:
- Company Voluntary Arrangement (CVA) – A legally-binding payment plan entered into by a company and its creditors. CVAs typically last 3-5 years during which time debt repayments will be restructured into manageable instalments, with any unaffordable debt written off.
- Administration – A company can be placed into administration to allow for wide-scale restructuring to occur. This can include streamlining the business to close down unprofitable areas, refinancing existing liabilities, or arranging a sale to a connected or unconnected third party.
- Time to Pay Arrangement – When a company’s main debts are owed to HMRC, a Time to Pay plan can be entered into to give a company more time to pay its tax debts. HMRC will need to agree to putting a Time to Pay plan in place, however, our team of licensed insolvency practitioners can negotiate with HMRC on your behalf.
How Scotland Liquidators can help if your company cannot pay its debts
If your company cannot keep up with its debt repayments, the experts at Scotland Liquidators are here to help. Our team of licensed insolvency practitioners can talk you through your options and work alongside you to put a robust plan in place whether you are looking to save, or close down, your company.
Take the first step and contact the team today.
