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Advice for Commercial Linen and Laundry Operators

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Company debt advice for commercial linen and laundry companies

How can you protect your business from rising costs due to Covid-19, Brexit, and sector challenges? Understand formal insolvency procedures to help save or close your hospitality business, such as a Company Voluntary Arrangement (CVA), Company Administration or Creditors’ Voluntary Liquidation (CVL).

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Rescue, Recovery, and Closure Options for Linen and Laundry Companies

If you are operating a commercial linen and laundry company, the past couple of years may have posed some unprecedented challenges. The Covid-19 pandemic was a tale of two halves for the industry, with those holding contracts with nursing homes, hospitals, and other healthcare operators, finding demand skyrocketing; while those primarily serving the hospitality industry witnessing trade dropping to all-time lows.

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Rescue options for commercial linen and laundry service providers

If your commercial linen and laundry company is experiencing difficulties, there are a host of formal and informal processes which may be able to help.

  • HMRC Time to Pay (TTP) Arrangement

For those who have seen the drop in demand for commercial linen and laundry services lead to you falling into arrears with HMRC, negotiating a Time to Pay (TTP) arrangement could be the solution.

A TTP gives a company additional time to bring their tax arrears up to date. Most TTPs run for between 3-6 months, although terms of up to 12 months can be negotiated in some instances. Agreed monthly repayments will be made to HMRC for the duration of the TTP to cover accrued arrears, and companies must ensure they also keep up to date with any current or future tax liabilities which become due.

  • Company Voluntary Arrangement (CVA)

A CVA is a formal payment plan which is entered into by a company and its outstanding creditors. Unlike a TTP arrangement, a CVA can encompass multiple creditors rather than just HMRC. CVAs typically run for between 3-5 years, and during that time the company will make one recurring monthly repayment which will be distributed amongst creditors on a proportional basis by the acting licensed insolvency practitioner.

As CVAs work on the principle of using future earnings to repay existing debts, they are only suitable for companies which can demonstrate their ongoing viability as a successful and profitable entity. Creditors will vote on the proposed CVA and they are only likely to agree to it if they are confident in your company's future. At least 75% (by value) of creditors must agree to the CVA being put in place, however, once this agreement is given, all creditors included in the CVA are bound to its terms regardless of how they voted.

Closure options for your linen and laundry company

If the challenges you are facing have rendered your commercial linen and laundry company unviable, and prospects of effecting a turnaround are slim, you may need to consider placing the company into liquidation. This can be done using a director-initiated process known as a Creditors’ Voluntary Liquidation (CVL).

The appointed licensed insolvency practitioner will handle the whole process on behalf of the company, including liaising with creditors and ensuring the company is brought to an orderly end. Any debts remaining will be written off once the company is liquidated so long as these have not been secured with a personal guarantee.

Although staff will be made redundant as part of the liquidation process, those eligible will be able to make a claim for redundancy. In many instances the directors of an insolvent limited company will also have a valid claim for a redundancy pay-out; your insolvency practitioner will be able to discuss this with you further.

How Real Business Rescue can help

If your commercial laundry limited company is experiencing financial problems and you would like some free advice to discuss your options and the way forward, contact the experts at Real Business Rescue today. You can speak to a licensed insolvency practitioner in complete confidence, helping you to understand the most appropriate next steps for you and your business.

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