My company is going bankrupt – what are my options?

If your business is in serious financial decline and you fear bankruptcy, it’s important to know that the UK runs a supportive insolvency regime for businesses in distress. This means that even if your company becomes officially insolvent, it doesn’t have to mean immediate closure.

Insolvency is the 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 in this situation.

So what are your options if your company is going bankrupt? One possibility is to secure funding that supports your cash flow, but there are other official procedures that can ultimately prevent liquidation.

Seeking professional advice

When a limited company is going bankrupt or enters insolvency, it’s crucial to seek help from a licensed insolvency practitioner (IP). A licensed IP is required to administer all official insolvency procedures, and can provide a reliable assessment of your company’s current situation.

Here are some of the possible routes that might steer your company away from bankruptcy:

Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement restructures your company’s debts so that the creditors included in the arrangement receive a pre-agreed proportion of their money every month. CVAs typically last for 2-5 years, and once in place, allow you to regain control of your business. They’re only suitable for companies assessed to have a viable future, however, so what else might be available to help you avoid company bankruptcy?

Alternative funding

Sometimes companies simply need more funding to avoid insolvency, and there are significant advantages in securing alternative forms of finance. As an example, invoice finance is a flexible option, and offers a cash injection each time you send out an invoice.

Factoring and invoice discounting are both forms of invoice finance based on the value of your sales ledger. You can also outsource your credit control function to a factoring company if appropriate.

Company restructuring

Company restructuring can involve the sale of assets to relieve financial pressure on a business, but it may also mean staff redundancies. An insolvency practitioner will assess suitable streamlining measures with a view to the company trading its way out of difficulty.

Company administration

Company administration offers an eight-week moratorium in which all legal action against the company is stopped. The administrator then plans the best course of action for the business with no creditor pressure.

There are various possible exits from administration, including the above-mentioned CVA, and company liquidation. So what happens if your company can’t be saved and does have to be liquidated?

Creditors’ Voluntary Liquidation (CVL)

Creditors’ Voluntary Liquidation means the company closes down following the sale of all assets. Creditors are repaid as far as possible, and any remaining debts are officially written off by the liquidator.

One of the advantages of CVL is your potential ability to claim redundancy pay as a director. This redundancy sum could help to pay for the process, pay off the company’s debts, or perhaps support your own personal financial situation given the loss of your company.

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.

We can also establish whether or not you’re eligible to claim director redundancy, and explain the process in more detail. Please contact one of the team for a free same-day consultation – we work from a wide network of offices around the country.