If you’re company is either insolvent or very close to that point you might approach an insolvency practitioner (IP) to discuss your options. It may surprise you to learn that an IP’s remit stretches far beyond merely liquidating companies. They are skilled in the art of business recovery and rescue.
In this article we’ll explore what business rescue and recovery mean, and the common processes used.
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Business Recovery Definition
While an insolvency practitioner's remit is to bring the best return for creditors, it may also include keeping the company going if that is the best solution.
If we consider a football club, as an example, it is impractical that a well known football club would be liquidated. It is more valuable as a going concern, and hence corporate recovery via a process such as administration would be the obvious choice.
Business rescue is about finding optimum ways to return the company to profitability. Insolvency practitioners have the experience to look deeply into how company's work and implement restructuring measures. If executed correctly, a company can emerge from this period with a long and healthy future ahead of it.
Negotiating Your Existing Business Debt
One of the primary rescue processes is known as a Company Voluntary Arrangement which means proposing a formal debt repayment plan with creditors.
CVA's must be proposed to creditors by an insolvency practitioner who presents them with a formal repayment plan to vote upon. If agreed, your company will have a roadmap towards being debt free. The CVA proposal is commonly for a proportion of your debts rather than the complete amount.
Could Alternative Finance Help Your Business Recover?
Any business rescue expert will certainly consider whether finance is an option, assuming the business remains viable. While a business might have reached cash flow insolvency it could still have a lot of invoices owed which simply haven't been paid yet In these circumstances invoice factoring, for example, can be a useful way to improve the cash flow cycle.
Putting a Business in Administration
Perhaps the most well known business rescue mechanism is known as administration. Administration is a process intended to give breathing room to a larger company facing creditor pressure or insolvency so it can get back on its feet. Administration means a moratorium against legal action, and a period of time for an insolvency practitioner to examine the company's financial affairs and restructure.
While the administration has a primary duty to creditors, they are also very useful ways to rescue a company as a going concern.
Time to Pay Arrangements with HMRC
The UK's most common creditor is HMRC and when tax bills are overdue they have a range of tactics to pressurise the company into settling its debt. Many directors fail to realise that HMRC are open to structured payment plans, usually over a maximum of 12 months. These 'time to pay arrangements' are usually offered only to businesses who don't have one in place already, and who appear to able to afford the agreed repayments.
For larger sums, the use of a specialist such as ourselves, with experience mediating with HMRC, can be useful.
Sometimes recovery just isn't an option. Businesses may be too far in debt, to embroiled in legal action by creditors, or simply no longer viable because of a changing marketplace.
In these cases liquidating the company may be the only option. By choosing voluntary liquidation you can eradicate creditor pressure and, as a director, start again with a clean slate.
If you'd like one of our experts to examine your situation and give you an informed confidential opinion, please make contact with us via telephone, live chat or one of our contact forms.