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Company Insolvent? Is It Still a Viable Business?

Licensed UK Insolvency Practitioners FREE Meeting for Company Directors

We can help with serious company debts, HMRC and creditor pressure, VAT/PAYE/Tax arrears, cashflow problems and raising finance.

We Are Deeply in Debt - Is it Possible for a Lender to Force My Company into Bankruptcy?

Last year we got a secured loan to pay off some of our debts and instead invested in an endeavour that turned out to be not-so-fruitful. Ever since then we have been unable to make payments on the secured loan that we should have used to get rid of our old debt, and the new debt appears to be a  bigger problem because the lender is now threatening to send our company into liquidation if they don’t receive a payment by the next due date. Now we know that they have the right to seize the assets the loan is secured with, but can they really send us into bankruptcy for not paying?


Answer

Yes, it is possible for a creditor to put your company out of business permanently for owing them a debt of more than £750 for more than 21 days after an official payment demand is issued. They may also be able to petition to have the company wound up sooner than that if your loan agreement includes provisions that allow for express appointment of an administrator.

The first step the lender will take to close your company is they’ll serve a winding up petition to your official business address. Then, 7 days later they’ll advertise the petition, letting banks and other businesses know that your company is in the process of being forced into compulsory liquidation. Once the banks see this advertisement they will freeze your company accounts, effectively rendering the business bankrupt.

The good news is, if you act quickly within the 7 days that creditors have to wait to advertise, you may be able to work out a company voluntary arrangement (CVA). This formal agreement would give you new loan terms that would typically provide lower monthly payments. However, the length and total amount of the loan may have to be increased in order to satisfy the creditor.

If you choose to go the route of a CVA you would need to appoint an insolvency practitioner to draw up the proposal and present it to one or more lenders at a creditors’ meeting. If approved, the new arrangement will dictate how much your monthly repayments are. In addition, you may be able to use the CVA to reduce payroll expenses by terminating employee contracts, and save on overhead by terminating supplier contracts. 


Who we help

  • Company Directors
  • Finance Directors
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Contact our team

Jonathan Munnery
Andrew MacKenzie
Julie Palmer
Thomas Mckay
Keith Tully
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Licensed Insolvency Practitioners