My company is a mess and it seems there is no way out of the situation other than to go out of business. What should I do first?
Note: If you don't feel like reading the guide below and following these action points you can save your great deal of time by skipping to the last step and taking free advice from an insolvency practitioner.
If your business is failing and you feel that there is no reasonable prospect of recovery then consider the following 5 actions points you can take to mitigate the negative effects of insolvency and/or bring about an unexpected recovery:
As soon as you have knowledge of the company being insolvent you are required by law to cease trading immediately. If you continue to trade knowing that the company is insolvent without a realistic prospect of being able to repay its debts you could be accused of wrongful or fraudulent trading, both of which are serious offences that could result in penalties such as fines, being held personally liable for company debts, directors' disqualification, and even imprisonment.
As soon as you cease trading you should contact HMRC and your creditors to notify them that your business is insolvent, has ceased trading, and is currently in the process of taking the necessary actions. Contacting HMRC as quickly as possible is especially important, as is notifying any creditors that may have already threatened to take legal action. You do not have to notify customers and suppliers, however after you've ceased trading it is unlawful to take on any new jobs/contracts, or to create any new company debts.
View our main pages and/or download our guides to learn more about what it means to be insolvent and what happens during the liquidation process. By preparing yourself for what to expect you'll be in a better position to avoid unnecessary mistakes that could lead to accusations of misconduct when the liquidator conducts the mandatory post-liquidation investigation.
Depending on your situation you may not have to concede to liquidation and dissolution just yet! There may be some recovery options that you're overlooking, including company voluntary arrangement (CVA), administration, asset-based financing, and pre-pack administration.
Finally, the only way to know for sure what the best course of action is for your company is to consult with an insolvency practitioner. We provide free advice via email or on our directors' support line at 0800 644 6080. Contact us today and take the first steps in facilitating a recovery or putting your stressful business endeavor to an end.
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