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What support is available if my company can't pay creditors?

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What support is available if my company can't pay creditors?

If you can't afford to pay creditors, you should seek immediate advice from a licensed insolvency practitioner who will be able to talk you through your options. Ignoring your creditors will not make the problem go away, and they are only likely to pile further pressure on you and your company.

When your company can't afford to pay its creditors what are your options?

If you are experiencing increasing pressure from creditors and your company is not in the position to be able to pay its bills, debt repayments, and other liabilities as and when they fall due, your business may be insolvent. 

Receiving pressure from creditors and falling behind in your payments to creditors are major warning signs that all is not well with the financial health of your business. While the situation may seem insurmountable, rest assured there are a range of options available to companies in exactly this position.

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If you believe your company is already insolvent, you must seek the advice of a licensed insolvency practitioner as a matter of urgency. Once you know your company is insolvent, you have certain legal duties that you must comply with; one of these is to protect the interests of your creditors.

If you carry on operating the business while knowing that the company was insolvent (unable to pay its bills and with debts that exceed the combined value of all its assets) at the time, you could be accused of wrongful trading further down the line which could see you becoming personally liable for some of the company's debts.

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How can an insolvency practitioner help with creditor pressure?

Once you have appointed the services of a licensed insolvency practitioner - whether this is to liquidate the business or to attempt a rescue via an administration process - you will find that creditor pressure is immediately lifted.

The insolvency practitioner will liaise with creditors on your behalf, informing them of the company's position, and the likelihood of them receiving the money they are owed. Many directors find that the increasing creditor pressure they receive as their company's position declines to be extremely stressful, and that having this lifted is a huge weight off their minds.

Mounting creditor pressure?

If your creditors are growing increasingly impatient, it is time to take action. Ignoring the situation is only likely to make it worse. Take the first step today by contacting Real Business Rescue for immediate help and advice.
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What options are available if you cannot pay your company's creditors and debts?

Depending on your company's financial position, future viability, and the appetite of its directors to continue trading, there are a number of options available:

Attempt a CVA - If you'd like to save the business and continue operating as a going concern consider instructing an insolvency practitioner to propose a CVA on your behalf. If approved this agreement would allow you to renegotiate your repayment terms with creditors, giving your company the time it needs to recover. Once approved, a CVA is legally binding on all parties which gives you much more security that an informal creditor arrangement would.

Enter Into Administration - If creditors are pressuring you to act and are threatening to put you out of business, you may be to place the company into administration. While in administration, a moratorium would be given providing a legal ringfence around the company. This prevents your company from being subjected to any legal action by creditors which will help to ease the immediate pressure being felt.

Pre-pack Administration - Pre-pack administration involves selling the company and/or its assets in a sale which is pre-arranged before the administrator is formally appointed. This sale can be to a connected or an unconnected third party. An insolvency practitioner would first have to determine whether a pre-pack would be a suitable option, and if this is likely to represent the best overall value for creditors.

Seek Financing – Depending on your company's position, refinancing existing borrowing may be all that is required to get the company back on a solid financial footing. Refinancing on more favourable terms can not only reduce the immediate cost of borrowing, but save you a considerable amount of money over the life of the finance agreement. However, taking out more finance when a company is already heavily indebted is an extremely risky strategy and should not be attempted without the approval of a licensed insolvency practitioner. If the company is already insolvent, obtaining further finance could be a breach of your duties as director; you should seek professional insolvency advice as a matter of urgency once you know the company to be insolvent.

Can’t pay CBILS or Bounce Back Loan?

Don't worry - there are thousands of other company directors in the same position. If you are struggling to keep up with your Covid loan repayments, speak to a member of the Real Business Rescue team to discuss your options. It's Free & Confidential.
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What if financial pressure becomes too much?

If the company's financial pressures have taken it beyond the point of rescue, it may be the case that liquidation is the only viable solution. There are two forms of liquidation:

Creditors' Voluntary Liquidation - A Creditors' Voluntary Liquidation is a director-initiated process which brings about the end of a company, its outstanding debts, and stops creditor pressure. Once the insolvency practitioner is appointed, they will be responsible for dealing with creditors and ensuring they are paid as far as possible by selling company assets. Once this has been done, the company will be dissolved at Companies House.

Compulsory Liquidation – If creditor pressure gets too much, you may find they lose patience and apply to the court to have your company forcibly wound up.  This is know as a compulsory liquidation. This is a very costly option for creditors and therefore they will often only use this as a last resort; however, in some cases, if a company continues to ignore the creditor pressure being placed on them, they could find their creditors take this step to resolve the situation.

Need to speak to someone?

If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080

When you can't afford to keep up with financial obligations, operating a business can be extremely stressful. As insolvency practitioners we're licensed to provide you with the right advice and expert guidance you need during these times.

If you are facing increasing creditor pressure, can't pay your company's debts, and you don't know which way to turn, contact our team today for immediate help and advice.

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