The Coronavirus Job Retention Scheme, or furlough, comes to an end on 30th September 2021. Businesses will then start paying a full wage bill, with no further support from the government expected.
These costs, in addition to the expiry of other government coronavirus schemes, bring to a head cash flow concerns for many business owners, and the possibility that their businesses won’t survive.
So is there anything you can do in this situation, and what might be your options?
If you’re considering making staff redundant after furlough ends, it’s vital to follow the same statutory procedure as for non‐furloughed employees. Those on furlough have the same rights as their colleagues, and can make a claim for unfair dismissal or discrimination if you don’t follow due process.
Although redundancies are clearly not an ideal course of action, as long as they’re fair, cutting costs in this way may help the business to survive. Redundancies may not be your only option, however.
Worried about your Bounce Back Loan?
If you are a limited company director worried about how you are going to repay your Bounce Back Loan, we are here to help. As licensed insolvency practitioners we can talk you through your options when it comes to repaying your outstanding Bounce Back Loan, as well as handling all negotiations with creditors on your behalf. Call our team today on 0800 063 9262 .
If the business is deemed viable and able to trade its way out of difficulty, restructuring debts within a formal arrangement could help it survive after furlough. A Company Voluntary Arrangement, or CVA, would protect the business from creditor action, and typically lasts for 3‐5 years.
You may find that creditor pressure increases once furlough ends, and there is less cash available to meet all the bills. If this is the case, entering company administration would protect the business for eight weeks from being forcibly closed down by a creditor.
During this time the administrator puts in place a plan for the future, which might include selling the business as a going concern, or perhaps the Company Voluntary Arrangement mentioned above.
Alternative sources of finance, such as factoring and invoice discounting, can quickly improve availability of working capital, and offer confidence that staff wages and other bills can be covered.
As an example, invoice finance provides regular inputs of working capital using the value of your sales ledger. Other forms of alternative finance are also available, however, including asset finance and merchant cash advances for retailers.
If your business cannot survive after furlough ends, placing it into voluntary liquidation is the best option. If you were to wait to be forcibly wound up by a creditor, you could increase financial losses for creditors as a whole, and face action by the Insolvency Service.
Creditors’ Voluntary Liquidation (CVL) enables you to protect creditor interests and reduce the chances of misconduct or wrongful trading allegations. You may also be eligible to claim director redundancy pay if you worked for your company under a contract of employment.
In addition to working under an employment contract, to be eligible for director redundancy you need to have:
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.
If you cannot pay bills as they fall due, including staff wages, it means your business is insolvent. You must cease trading straight away and seek professional assistance from a licensed insolvency practitioner (IP).
By obtaining professional support as soon as possible, your business stands a better chance of surviving after furlough ends. So get in touch with our team of licensed insolvency practitioners at UK Liquidators to establish your best options, and arrange a free, same‐day consultation.
If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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