If you believe that your business is failing, it’s important to verify that it’s not insolvent. This helps you to avoid accusations of wrongful trading - if it’s entered insolvency, by law you have to prioritise the interests of your creditors.
So how do you know if a failing business has fallen into insolvency? When you cannot pay the bills as they fall due, or your balance sheet shows the value of company liabilities to be greater than its assets, it’s likely that you’re insolvent.
Even if your business has declined to this level there are measures available to turn it around. To take the right mitigating actions, however, it’s important to understand the reasons behind its decline.
Establish why the business has failed
The failure may have been almost imperceptible if it happened over a period of time. Conversely, if a key customer has been lost, the sudden fall in turnover could explain your current situation. Understanding why your business has declined ensures you take the right steps to turn it around, and don’t waste time on ineffective or unnecessary actions.
Concerned about National Living Wage and NI increases?
With the rates of both National Living Wage and employer National Insurance Contributions increasing in recent years, this additional cost of employing staff has added more pressure onto already squeezed cash flows. If you are worried about the impact this is having on your company's finances, talk to the experts at UK Liquidators. As licensed insolvency practitioners we can explain your options and help you plot a way forward. Call today on 0808 253 9878.
Seek support from insolvency professionals
Licensed insolvency support is available at any stage of business, and obtaining advice early on provides you with a significant advantage in this situation. A licensed insolvency practitioner (IP) will ensure you don’t place yourself at risk of wrongful trading, which is a significant issue – one that’s sometimes overlooked by directors who carry on trading with the best intentions.
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Alternative forms of finance are typically quick to access compared with standard bank loans, and offer businesses valuable flexibility. The most appropriate form of alternative finance largely depends on the type of business you run, and the industry in which it operates.
Businesses that own assets of value may benefit from asset-based finance, for example, without losing use of the asset(s). Invoice factoring is another example of alternative funding, and this injects regular sums of cash into the business to help keep up with bills so you can build confidently with new financial stability.
HMRC Time to Pay (TTP) arrangement
HMRC’s time to pay scheme offers help to businesses that are struggling to pay their tax liabilities. To be eligible for a TTP your business must not be insolvent, and you’ll need to provide documentary support for the application. This typically includes cash flow and sales forecasts.
Company Voluntary Arrangement (CVA)
This formal agreement restructures your debt repayments so they’re more affordable as the business trades its way out of financial difficulty. Typically suitable for larger companies experiencing decline for a specific short-term reason, a CVA protects the business from creditor legal action as long as you keep up with the repayments.
Administration
Company administration can help you turnaround your failing business, initially by providing protection from creditor action. During the eight-week moratorium, the administrator establishes a route out of administration, which could include the above CVA or perhaps a pre pack sale. Company restructuring in the form of a sale of non-essential assets could also free up valuable cash that encourages recovery and growth.
Start your online liquidation today
If you have decided liquidation is the right option for your limited company, you can take the first step and begin the process online using our online portal. Starting the process is quick, simple, and can be done at a time that suits you. Your information will be submitted to your local UK Liquidators insolvency practitioner who will be with you every step of the way. Click here to start your company’s liquidation online.
Creditors’ Voluntary Liquidation (CVL)
Although not a turnaround option, if your efforts to rescue the business aren’t successful, CVL ensures you fulfil your legal duties as a company director and can protect creditors from further financial loss.
For more information on potential turnaround options if your business is failing, please contact UK Liquidators. We operate from a nationwide network of offices, and can offer you a free same-day consultation to quickly establish your best options.
Jonathan Munnery
Insolvency & Restructuring Expert | 20+ Years Insolvency Experience
Jonathan is a Partner at Real Business Rescue and member of both the Insolvency Practitioners Association (MIPA) and The Association of Business Recovery Professionals (MABRP). Jonathan has over 20 years’ experience guiding directors through CVL and MVL processes, helping them understand their options and navigate financial distress with clarity and compassion.
IPA Member MABRP Member IPA Regulated
“ Directors often wait too long before seeking advice. The earlier you call, the more options remain available to you — and the better the outcome for everyone involved. ”
Jonathan is a Partner at Real Business Rescue and member of both the Insolvency Practitioners Association (MIPA) and The Association of Business Recovery Professionals (MABRP). Jonathan has over 20 years’ experience guiding directors through CVL and MVL processes, helping them understand their options and navigate financial distress with clarity and compassion.
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