Advice for directors of UK companies struggling due to the Brexit referendum

Reviewed: 2nd December 2016

Some companies in the UK are facing considerable financial difficulty following the Brexit referendum, as the uncertainty of ongoing trade with Europe continues. The value of sterling, several legal challenges, and a prolonged path to trigger Article 50, are all having an adverse effect in many sectors.

For companies that were in financial trouble prior to the referendum, the outlook is bleak despite the benefit to exporters of a recent rise in sterling. Those importing goods from Europe have seen a dramatic rise in costs, however, that is threatening to make trade unsustainable.

Companies trading with Europe particularly affected

Financial turmoil is being experienced by the manufacturing industry in general, post-referendum. Some organisations that trade with Europe have reached crisis point, whether due to the inevitability of reduced trade under these circumstances, or an increase in the associated costs.

So what options are available if you’re a business in this position, and how can you prevent a further decline in your financial situation?

Seek professional assistance

Professional guidance is crucial in not only establishing the true severity of your situation, but also to identify all the available options. Real Business Rescue specialises in business rescue, insolvency and finance, and are part of the largest professional services firm in the UK.

Our fundamental aim is to rescue businesses struggling to stay afloat, and this can potentially be achieved in a number of ways. Once we have analysed your position and understand the implications of the situation, we can advise on the best way forward.

Here are a few of the options that could potentially be available for your business:

Company Voluntary Arrangement (CVA)

Owning assets of value alongside regular cash flows are two prerequisites for a Company Voluntary Arrangement. The process involves negotiating with creditors for an extended payment period, so that repayments are sustainable as the company continues to trade.

It is a formal arrangement that can offer the space needed to reorganise and regroup effectively, without having to deal with creditor pressure.

Benefits

All legal action is stayed whilst the CVA is in place
Directors benefit by regaining control of the company once the initial set-up period has ended
Creditors receive regular payments towards the debt

Creditors’ Voluntary Liquidation (CVL)

If creditor pressure is relentless and your company is not eligible for a CVA, a Creditors’ Voluntary Liquidation can minimise your exposure to accusations of director misconduct.

Once insolvent, the company must stop trading in order to maximise creditor returns. If this has not been done, by initiating a CVL you are putting creditor interests ahead of your own and those of the company.

Benefits

Reduces the threat of personal liability for directors
Removes the pressure of debt
Directors have control over the appointment of the liquidator

HMRC Time to Pay arrangement

HM Revenue and Customs offer an extended time to repay tax debt to some companies experiencing temporary difficulty, which might be useful if your business needs an interim period with reduced pressure from creditors.

We have vast experience of dealing and negotiating with HMRC, and can present a positive case on your behalf if your company is eligible.

Benefits

Removes the extreme pressure directors often feel when facing HMRC action
Offers a period of time (usually around six months) to repay arrears of corporation tax, VAT or PAYE
Avoids penalties and builds a better relationship with HMRC

Finance

Lack of funding is often the final straw for struggling businesses. If you think there are no more options with regard to additional funding, and feel that the existing cash position will no longer sustain your business, we may be able to help.

We have connections with alternative lenders around the UK, including crowdfunders, peer-to-peer lenders and invoice financiers.

Benefits

Alternative lending may be more suited to your business model than standard bank finance
This type of lending provides flexibility of terms and conditions
It offers speed of access to vital working capital

Company administration

The goal when entering company administration is business recovery, and this is often achieved through restructuring and reorganising the company’s affairs. A moratorium period allows directors a respite from creditor action, while the appointed insolvency practitioner takes over the running of the company.

Benefits

Any existing or proposed legal action is stayed
A number of routes out of administration are available
Directors can regain control of the company at the end of administration

Pre pack administration

If your business meets all the conditions for a ‘pre pack’ sale, the underlying assets may be sold to a third party or trade buyer. Existing directors are also able to purchase these assets using their own funds, and the speed of sale means that trade can continue largely unabated without the pressure of debt.

Benefits

Directors start afresh with the new company, as long as it is proved that this route offers the best return for creditors
Jobs are often retained, as employee contracts transfer to the new company
Business is largely uninterrupted due to the quick sale

Our extensive office network comprises 72 offices across the UK with a partner-led service offering immediate director advice. Our team provides professional advice and assistance to company directors facing insolvency, and can establish the best way forward for your business. Contact us to arrange a same-day consultation free-of-charge.