Your Business With James Caan Autumn 2024 1 - 383

YOUR BUSINESS _ AUTUMN 2024
in growth. If you're struggling to
pay a tax bill, HMRC offers flexible
" Time To Pay " tax repayment plans.
" When times are tough, many
directors seek secondary lending
options, where personal guarantees
are applied, and when the inevitable
happens, they have serious personal
debt issues, " says James Langley,
insolvency director for AABRS. " So
it's better to seek professional advice
earlier rather than kicking the can
down the road. "
RECOVERY IS POSSIBLE
WITH THE RIGHT HELP
Early intervention and strategic planning are key to recovery,
explains James Langley, insolvency director for AABRS
" The UK business community is facing a rise in corporate
insolvencies due to the economic challenges caused by inflation,
It's important to try to minimise
the loss to your creditors. If they
believe you're doing your best to pay
them, they are more likely to accept
a creditor repayment arrangement
or reduced debt through a Company
Voluntary Agreement (CVA), in
order to continue receiving ongoing
business from your company.
When the worst happens
If the situation is not recoverable,
your business faces being liquidated.
This can come in several forms.
Creditors' Voluntary Liquidation
(CVL) is where the company
voluntarily closes and cannot pay its
debts, while Members' Voluntary
Liquidation (MVL) is where a
company closes down but
is able to pay its debts.
Both require a licensed
insolvency practitioner
- choose one recognised
by a professional
rising interest rates and the cost of living crisis.
" Common misconceptions about insolvency include viewing
it as a failure rather than a restructuring opportunity, and believing
that it permanently ruins credit. People often think insolvency
practitioners are solely debt collectors, but their role is to manage
and resolve financial distress, aiming to maximise returns for
creditors while supporting businesses and individuals.
" Emerging trends in the UK insolvency sector include increased
use of digital tools for efficiency, a focus on early intervention
strategies, and a rise in restructuring plans. Regulatory changes
and evolving economic conditions, such as inflation and interest
rates, are also reshaping how businesses approach financial
distress and recovery. For example, HMRC became the preferential
creditor for VAT and NIC in 2020, resulting in less money being
distributed to unsecured creditors.
" Businesses facing financial difficulties should seek professional
advice early, prioritise cash flow management, and explore
restructuring options. Open communication with creditors and
stakeholders is crucial, alongside implementing cost-saving
measures and considering alternative financing. Early intervention
and strategic planning are key to navigating financial challenges
and achieving potential recovery. "
body such as the Institute of
Chartered Accountants in England
and Wales (ICAEW) or the Insolvency
Practitioners Association (IPA).
If your company is forcibly closed
down, this is known as Compulsory
Liquidation. This happens when a
petitioner (such as a shareholder,
creditor or HMRC) provides proof of
the business's inability to pay a debt,
and a " winding-up petition " is
filed in court. In this case,
the business's bank
accounts are frozen
and the company
ceases trading.
Protect yourself
The directors of a company have
certain legal obligations when a
company becomes insolvent, and
failing to fulfil these can lead to
personal liability, legal action from
creditors, being disqualified from
acting as a director of any company,
and even criminal charges.
A formal insolvency process can
protect you from legal action by
creditors, and give you a chance to
restructure the business to make
it more viable. It can also allow
you to reduce your debt burden to
make a fresh start, and identify the
underlying cause of the insolvency
in order to make better financial
plans in future. However, insolvency
law is complex, which is why it's so
important to get a professional on
board as early as possible.
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