Advice for you, if you are a director of a struggling SME

John Bell is Director of insolvency firm Clarke Bell

 

There have been reports in the press about the number of companies which are facing insolvency in the wake of the Covid pandemic, Brexit and wider economic and political instabilities. Of those companies who are using an insolvency procedure to deal with their situation, the vast majority are using the Creditors’ Voluntary Liquidation (CVL) process.

The UK economy is in a fragile state as the impact of Covid-19 continues to bite, and many companies will be left reeling for some time to come.  Some company directors have had little choice but to borrow money courtesy of Government schemes, both in the form of Bounce Back Loans (BBL) and the furlough scheme, just to survive.

As we emerge from another lockdown, many directors are concerned that they cannot hang on for much longer.

For any company having serious cashflow problems and debts which it cannot pay back, then John Bell, the director and founder of licensed insolvency firm Clarke Bell, urges you to take control of your situation and get professional help as soon as possible.

For struggling companies with little or no chance of survival, a Creditors’ Voluntary Liquidation (CVL) is often the best course of action to deal with the business debts and fulfil your legal obligations as a company director.

Why consider a CVL?

There are several benefits for both directors and creditors using a CVL:

  • This is a good option for directors who want to take control of their situation and act before things get any worse for their business.
  • As a voluntary process, directors are free to choose which Insolvency Practitioner they appoint to carry out the CVL.
  • The director can close their business but always has the option to open another business in the future.
  • By opting for CVL, directors can avoid their company being forced into compulsory liquidation which is the most serious type of liquidation.

First and foremost, you should contact a licensed insolvency practitioner for some free and confidential advice to see if a CVL is the best option for you and your company. They will tell you if there is a better option for your particular situation.

If a CVL is the right solution, the insolvency practitioner will work with you and your accountant (where applicable) to collect all the necessary information to proceed with the liquidation.  They will seek to gather a full list of your creditors, along with copies of your company accounts. As soon as the CVL process starts, your company will need to stop trading.

Your insolvency practitioner will lead you through the process step by step – including all the necessary paperwork, the board meeting and members’ meeting (both of which are normally held online).

Doing nothing is not an option when you are the director of a company that is facing financial difficulties – especially since, as a company director, you have a legal duty to do something about it.

The sooner you get professional advice, the more options you are likely to have open to you. Most firms of Insolvency Practitioners will give you free and confidential initial advice. So, you have nothing to lose by speaking to one.

A lot of company directors wish they had spoken to an Insolvency Practitioner a lot sooner than they did – as it would have stopped them from putting ‘good money after bad’ and avoided months of unnecessary stress and sleepless nights.

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