To help you with it, we list out five tips that can help you pull your company through the insolvency.
When you know that your company will soon be in no position to repay the debts of its creditors, take a proactive action and approach those creditors. Explain your situation to them and try to come up with some kind of mutual agreement. Though the creditors will be furious, they are more likely to try to cooperate with you rather than spend their time and money taking the company to the courts.
One of the key points to keep in mind is to keep your current business expenses to a minimum. Since you are already insolvent, you clearly will be unable to meet all expenses as usual. So, make a list of expenses that you consider non-critical for your business and cut it down.
For example, suppose that there are 40 employees in the firm doing a data entry work which can be outsourced. Now, if this decision will allow you to reduce the data entry expenditure by 60%, then you should definitely move ahead with it. The more money you can save on expenses, the better.
You can also try to get the creditors agree to a Company Voluntary Agreement (CVA). What this will allow you to do is to pay the existing debt over a period of time, either in part or full. The time period can range from 12 months to 60 months. You will need at least 75% of creditors to agree on this in order to make the CVA agreement legal and binding.
Another thing you can try out is to obtain an administrative order in the name of your company. By doing so, an insolvency practitioner will take over your company to decide on how to run the business and how to repay the current debt. During this time, the creditors cannot take any action against the company. However, if the practitioner feels that your business is as good as dead, they will move ahead with selling the company to repay the creditor’s loans.
The last option is to inject your own wealth into the company in order to revitalize it. However, keep in mind that this can be quite dangerous. After all, you are dealing with a company which is facing insolvency. And if the company gets shut down, then not only will you lose your business, but you will also lose all the money you invested during its last period.
It is also recommended that you consult a company insolvency advice group to manage the issue. Since they are professionals in this line of work, they will be in a better position to give you specific advice on how to save your business.