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Factors to be considered when facing financial difficulties...


An inability to pay bills when they become due , having higher liabilities than assets or having County Court Judgements entered against it are viewed as likely indicators that a company is insolvent. The Directors are required to take prompt action.


It is advisable for Directors to seek the advice of a licensed Insolvency Practitioner as soon as they are aware that the company is, or is likely to become, insolvent.


The advice can vary from re-financing the company, thus enabling it to continue to trade, restructuring the business or proposing an informal or formal arrangement (such as a Company Voluntary Arrangement) to its creditors.


If such arrangements are not possible, the company should stop incurring further credit and ensure the position of creditors does not worsen. The Directors have an obligation to act to protect the interests of the company’s creditors, not themselves or the shareholders.


If the decision has been taken to call a Meeting of Creditors in order to place the company into creditors voluntary liquidation, Directors should be particularly mindful that the financial position for creditors does not get any worse. This often means that the company should stop trading, however other actions such as not accepting goods or services on credit and not depleting the company’s assets may prove sufficient. It can be beneficial to continue trading if it will assist with completing contracts, collecting book debts or maximising the assets in some other way to the benefit to the creditors. These decisions need to be made following specialist advice.


Failure to act in the best interests of creditors (whether knowingly or not) can have serious implications for directors, so advice should be taken as soon as possible.


If you have concerns in this area, please do not hesitate to contact us.



For impartial, in-depth, one-to-one advice
contact us on 0161 438 8555 or

by email to info@jldllp.co.uk


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