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When is the right time to tell staff your company is insolvent?
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When to tell staff your company is insolvent?
If your company is heading towards insolvency, one of your main concerns may be centred on what this means for your employees. Should your company’s financial problems not improve, you may have to consider the prospect of closing your company for good, leaving your staff out of a job. Having to break this news is an unenviable task, but is one which should be done in as timely a manner as possible once the future path of the company has been decided.
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All businesses go through ups and downs, and in order to reduce causing unnecessary stress it may be advisable to wait until you are absolutely certain that the company has no future before notifying your staff. However, as soon as you know closing the company is inevitable, you should make it a priority to deliver this news to your employees. This will give them time to get their head around the situation and start planning for their future away from the business.
Depending on the size and structure of the business, office gossip about the impending closure of the company may be rife. Often the not knowing is one of the most stressful parts of the process, with staff constantly being on edge and worrying about an uncertain future. Reducing this uncertainty as much as possible is beneficial for all concerned.
Is your company insolvent?
If your company is insolvent you have a number of legal responsibilities that you must adhere to. Taking steps to protect creditors from further losses by contacting a licensed insolvency practitioner can help ensure you adhere to these duties.
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When delivering the news it is important to be clear and honest about the situation, while keeping in mind the severity of the situation and how the news could have major knock-on effects in other areas of their lives.
If your company is being wound up by a creditor, or if you are closing the business through a Creditors' Voluntary Liquidation (CVL), this process will be handled by an insolvency practitioner. Should it not be possible for you to deliver the redundancy news to your staff, maybe due to the speed the closure ends up happening at, the appointed insolvency practitioner will instead bring them up to date on the company’s position and notify them that they are being made redundant. The insolvency practitioner will also inform your staff of their eligibility to claim redundancy pay and other statutory entitlements, and ensure they have the correct forms they will need to start this process.
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If your company is heading towards insolvency and you are concerned how this will affect your staff, or how to start the process, you should contact a licensed insolvency practitioner for expert help and guidance. They will be able to advise you whether liquidation is the best option for your company or whether there are other viable solutions out there. Should liquidation be the most appropriate course of action, they will discuss the implications of this on your employees and how you can best manage this situation.
Real Business Rescue has a nationwide network of licensed insolvency practitioners who can help you decide on the best next step for your company and how to put this into action. Call our expert advisers today to arrange a free no-obligation consultation. We have an extensive network of 100 offices offering confidential director support across the UK.
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Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
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