Finding your business in debt is an unfortunate position to be in, but there are steps you can take to manage the situation and regain control of your finances. One option you can take is an informal arrangement to try and turn around your business fortunes. This is when you take steps to bring your debt under control, such as by selling off assets, focusing on core product sales and reducing your costs. You can then negotiate informal arrangements with creditors to pay them back.
If an informal arrangement isnt an option but your main problem is with irregular cash flow as opposed to structural issues, then you should investigate a company voluntary arrangement. This means that your creditors wont be able to take further action against you as its legally-binding. It involves constructing an agreement with your creditors so you can manage your outgoings while paying back your money over an extended period. Your interest and other charges will be frozen to make your debt more manageable.
If your business is insolvent and a CVA isnt an option, you may have to look at administration. The Enterprise Act 2002 has made it easier to do this. It will protect you from your creditors while the business is reorganized and the administrators will investigate ways you can once more make a profit. The resulting plan is then put to your creditors once the business is considered to be viable, meaning that the company should emerge from administration in a stronger position.
If you have a major creditor who has security over a large part of your assets (such as a bank), then you may have to look at Company Administrative Receivership. This is when an insolvency practitioner will help you put the company into a state of insolvency to protect the creditors and your directors. They can help you continue trading while steps are taken to sell off the business or otherwise recoup the necessary funds through the enhancement of asset values to pay off the major creditors.
Probably the biggest step to take for any company struggling with debt is liquidation, a process which often follows administration or receivership. This can often lead to company directors being disqualified from acting in similar roles. There are two types of liquidation: Voluntary Liquidation, which is instigated by company directors, and compulsory liquidation, which generally follows a court petition by either the company itself or its creditors. The companys assets are taken and distributed among the creditors according to their legal entitlement and priority.
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