If your business’s relationship with the bank is breaking down,and you find that you are having problems fulfilling your obligations,then your business could be insolvent. This is a devastating place to be considering the consequences that come with it,including loss of customers and bad publicity.
Once you conclude that your company could be insolvent,it is advisable to take immediate action to stop more damage from happening,like for instance the complete dissolution of the company. Your company can continue doing business despite it being insolvent,but this will require you to make agreements with your creditors who otherwise will pursue your company. Below is some company insolvency advice you could use in case you find yourself in this situation.
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Company Voluntary Arrangement â CVA’s.
This option is legally binding and gives a company time to repay all or part of the monies owed to their creditors,within an agreed time period. If the company successfully repays the debt within the stated period,it is allowed to continue trading.
In such cases,the company brings in a professional insolvency practitioner and makes their proposal known to the creditors. The proposal gives all the details of how the company plans on minimising their monthly expenditures while trading. Most creditors resist having this agreement because of the associated fees,which is also part of the repayment proposal. However,some prefer the CVA because the insolvency practitioner is legally obligated to act in their best interest,and thus,they are assured of payment in the future.
In other cases,a business may choose to have a sit down with the creditors and have an informal agreement. This option mostly works if the business is experiencing temporary financial difficulties that can be dealt with,and the creditors have not shown any signs of taking legal action against the firm. If you want to use this system,contact the creditors immediately you notice any signs of insolvency,explain the situation to them and work on a repayment plan that is reasonable and achievable. Remember this procedure is not legally binding and so the agreement could be withdrawn at any time. You must make sure you work towards paying the monies you owe them within the stipulated time to avoid [problems