If We Can’t Pay Our Bills Should We Stop Doing Business?
For the past 4 months we have had problems paying our bills and ongoing creditor pressure, and recently we’ve been getting calls from a lender and a supplier both threatening to shut us down if they don’t receive payment. Our operating costs have been greater than the amount of money we’re bringing in so we have had no choice but to neglect these two bills temporarily. We were planning on catching up on them, but now they are demanding lump sums and we’re not sure if we’ll be able to come up the funds in time. Should we stop doing business because we can’t pay our bills?
Answer
If a creditor does not feel as though they’ll be able to recuperate the debt through conventional means they may petition the court to wind up the company by forcing it into compulsory liquidation, administration, or receivership. Once they demands payment from you and threatens compulsory liquidation, bankruptcy, or any other legal action, your first response should be to contact an insolvency practitioner.
You do not have to stop doing business, as long as you are operating with the primary goal of acting in the best interest of your creditors as a whole. In other words, the company does not have to stop trading as long as it can show that it is attempting to repay creditors and that there is a realistic prospect of being able to repay the debt in full in the future.
Sometimes, the best course of action is to enter into administration voluntarily in order to postpone any legal actions being taken against the company for at least 8 weeks. During that time we can help you draft and propose a company voluntary arrangement (CVA) to creditors, in order to negotiate new payment terms and reduce monthly obligations. This would be a mutually beneficial agreement that would give the creditor the opportunity to increase their profits and recover funds while also saving the indebted company from an insolvency procedure.
By discussing the situation with an insolvency practitioner in detail, you can decide how to respond to such pressures in the most effective way possible. Being that you have multiple creditors to deal with, immediate focus needs to be put towards consolidating or re-arranging repayment obligations by any means necessary.
More from Insolvency
- My business is failing, what are my options?
- My company has been losing money for over a year. I would like to know how to close a UK Company.
- My Company Is Insolvent What Should I Do?
- My Business Is about to Go Bust, What Can We Do to Stop It?
- If We Can’t Pay Our Bills Should We Stop Doing Business?
Free Guide for Limited Company Directors
Business Rescue Advice for Directors
- How to manage company cash flow problems
- Advice on dealing with HMRC
- Understanding rescue and closure options
- And much more...
Business Rescue Guide for Accountants
Dealing with your Insolvent Clients
- Helping you advise insolvent clients
- Spotting signs of client distress
- Exploring business rescue options
- And much more...
