A company is insolvent if it either can’t pay its debts as and when they are due or if its creditors outweigh its assets on the balance sheet. They are many options available to a company that may be or is insolvent. These can include:
If your company is or will be facing financial difficulty you need to take advice and understand the options that may be able to your company.
These options include:
Creditors Voluntary Liquidation (CVL)
Creditors Voluntary Liquidation is the voluntary winding up of a company that can no longer afford to pay its debt and is insolvent on a cash flow or balance sheet basis.
Members Voluntary Liquidation (MVL)
Members Voluntary Liquidation is the voluntary winding up of a company that is no longer trading, and funds need to be distributed to shareholders once all creditors have been settled. This is used as a tax efficient way to close a company as long as the shareholders qualify for entrepreneur’s relief.
Company administrator is an insolvency procedure that is usually used either to rescue a company as a going concern, achieve a better result for creditors or realising property for the benefit of a secured creditor.
Company Voluntary Arrangement (CVA)
Company Voluntary Arrangement is a formal agreement between the company and its creditors. This agreement allows the directors to keep control of the company and continue trading while under protection from legal action and settling its debts at the same time.
Invoice Finance is a form of lending money to a company that is secured against invoices the company has generated. This in turn frees up cash from slow-paying accounts allowing the company to grow. This is only viable for businesses that trade business to business and not business to consumer.
Pre Pack Administration
Pre-packaged (or ‘pre-pack’) administration, is an arrangement for the sale of all or part of a company, this can include business and assets.
As a director of a limited company, you are entitled to claim redundancy just as any other employee is entitled to. Your claim is processed and paid through the governments National Insurance Fund and Redundancy Payment Service (RPS).
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