If your business is in serious financial decline and you fear your company could be on the brink of bankruptcy, it’s important to know that there are a range of options available to directors in this position to help them navigate the situation they have found themselves in. This means that even if your company becomes bankrupt, it doesn’t have to necessarily mean this is the end of the road for your business.
Insolvency is the technical term used to describe the situation where a company cannot pay its bills as they fall due, or when its total liabilities exceed its assets, but the term ‘bankruptcy’ is also sometimes used to describe this situation.
So what are your options if your company is going bankrupt?
Options for companies facing bankruptcy
When a limited company is going bankrupt - that is, it becomes insolvent - it’s crucial to seek help from a licensed insolvency practitioner (IP) as soon as reasonably practical. A licensed IP is required to administer all official insolvency procedures, and can provide an objective assessment of your company’s current situation to help you choose the most appropriate route forwards.
Here are some of the possible routes that might steer your company back to safety when bankruptcy is threatened:
Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement is a formal insolvency process that can be used to restructure the debts of an insolvent company, and help improve cash flow. CVAs typically last for 3-5 years, and involve the insolvent company making a scheduled repayment to the appointed insolvency practitioner who will divide this amongst the creditors included in the arrangement. Creditors will receive a pre-agreed proportion of the money they are owed, with some unaffordable typically written off.
While CVAs can be hugely beneficial in the right circumstances, they’re only suitable for those companies assessed to have a viable future. If your company is on the brink of bankruptcy, getting your creditors to agree to a CVA may not be possible, particularly if your relationship has broken down.
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Sometimes companies simply need more funding to steer themselves away from the threat of bankruptcy. This could be in the form of a traditional business loan which could provide a lump sum payment, or a more flexible form of funding such as a form of invoice finance which can provide a continuous and scalable channel of funding on an ongoing basis.
While securing additional borrowing may seem like the best course of action, caution should be exercised when piling more debt on a company which is already struggling financially. If your business is already insolvent, you should not seek to obtain more finance without first consulting with a licensed insolvency practitioner about your plans.
Taking out additional finance agreements you may not be able to repay could be considered an act of wrongful trading if you already know your business to be insolvent.
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.
Company restructuring
Company restructuring can involve the sale of assets to relieve financial pressure on a business, or scaling down operations to focus on those areas of the business which generate the most revenue. This could mean closing down certain stores or locations which are less profitable so that resources and finances can be better utilised once the operations are more streamlined.
While a process of restructuring could make the company more efficient, it may also mean staff redundancies. An insolvency practitioner will assess the appropriateness of streamlining measures and whether this could help the business trade its way out of difficulties.
Company administration
Company administration offers a chance for a business - or certain parts of a business - to be saved. Once a company enters administration, a moratorium is placed around the company which sees all legal action against the company stopped. The appointed administrator will then work towards planning the best course of action for the company free from creditor pressure.
Administration should not be seen as a solution in itself, rather a holding stage where plans can be made; sooner or later a company will need to exit administration. There are various possible exits from administration, including the above-mentioned CVA, a sale to a connected or unconnected third party, and even company liquidation in some circumstances.
Creditors’ Voluntary Liquidation (CVL)
Creditors’ Voluntary Liquidation means the company is closed down following the sale of all assets. Creditors are repaid as far as possible, and any remaining debts are officially written off. While liquidation may not be your preferred route, sometimes this is the only way to deal with bankruptcy in order to protect creditors and shield them from further losses.
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.
Professional support if your company is going bankrupt
UK Liquidators has extensive experience of helping company directors liquidate voluntarily, and can provide the guidance you need at this challenging time. We’ll quickly determine the best way forward, and clearly present the most suitable options.
Please contact one of the team for a free same-day consultation – we work from a wide network of offices around the country.
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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