What should your business be doing if you’re worried about insolvency?
By Mr Bankruptcy
29th April 2020
In March, The Independent newspaper reported that almost a fifth of UK’s small businesses could be gone within a month due to the financial crisis caused by Covid-19 restrictions. This is despite the billions of pounds of support being made available by the UK Government and the changes made to insolvency legislation to help company directors stay afloat during lockdown.
Now we know the extent of the crisis, I believe the Independent’s prediction is overly pessimistic; companies are adapting, improvising and overcoming to a greater extent. However, these are undoubtedly tough times for any business, large or small, and a business owner should be prepared to take action or seek help if necessary to survive.
Temporary changes to Insolvency legislation
To help directors avoid insolvency, temporary changes have been announced and it would be a good idea to be familiar with them:
- A temporary suspension of wrongful trading rules to allow directors to continue trading during the pandemic and save their business without the threat of personal liability should the business eventually become insolvent.
- Breathing space from creditors enforcing debt repayment whilst companies work to restructure or look for rescue.
- A new restructuring plan that commits creditors to the plan.
- Protection against being cut off from supplies and services which are essential for the business to keep trading.
The next steps if your business is struggling
The current circumstances are unique but the main causes of insolvency remain constant. We’ve previously discussed why businesses become insolvent, including the signs to watch out for, and many of these still hold good. If you’re concerned that you’re in this situation, here are some essential keys steps to take:
- Ensure you have all the facts and figures clear and correct so that you understand the scale of the issues you need to resolve.
- If you’re a company director, understand your legal duties and obligations if your business becomes insolvent.
- Talk to an expert and seek advice as soon as possible. Although talking about debt is not always comfortable, without expert advice you may not fully understand your situation, the potential options available to you and the impact of each of them.
- Don’t do nothing. When you’ve understood your options, choose one and take action; the problem won’t go away until you do this.
If we’re going to turn the economy around as quick as possible once the pandemic restrictions start to ease, it’s vital that as many businesses as possible survive the coming weeks, or possibly months, of restricted trading, and that could be down to owners and directors taking early action.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors facing unmanageable debt or involved in civil or commercial disputes.
Our services include:
● Insolvency support
● Negotiated settlements
● Personal assisted bankruptcy
● Mediation
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
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Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.