If you've drawn money from your business as a Director's loan and your business is under financial pressure or in...
Compulsory Liquidation – Prevention is better than cure
When a company becomes insolvent, there are generally warning signs prior to this happening and further signs once insolvency is underway.
While it’s unlikely that businesses can get to this point without anyone noticing, it’s not impossible. This especially the case when management is focussed purely on sales rather than profitability and the need to get the sales converted into payments. Usually though, an impending problems are spotted early enough, but not the warnings are not acted on. This can be for a variety of reasons such as wishful thinking, denial, or stubbornness.
People or organisations to whom money is owed are not powerless when it comes to recovering money due to them. If they decide that they have to take matters into their own hands, and the situation warrants it, they can ultimately apply to the court to force your business to close so that its assets can be sold and your debt with them settled in whole or in part.
A statutory demand should be taken very seriously
There are numerous stages in a winding up order being granted. It’s likely that your creditor or creditors will have made several attempts to secure payment for their overdue invoices. Following this, their intent to force your company into liquidation will be made apparent by them serving a statutory demand for payment. If you’ve received a statutory demand, you’ll have 21 days to either pay, or to dispute that money is owed. Fail to do so and the creditor or creditors will be able to move forward and petition the court for a compulsory liquidation.
Act now and you may still be able to turn it around
Even at this stage it’s still possible to save your business. Negotiating with your creditors isn’t out of the question, although they may be hostile given how much they will already have paid to take the process to this stage, but whatever you decide to do, it must be done quickly, time is very much against you. Do nothing and your company will be liquidated, with your own conduct as a director being subject to scrutiny. Doing nothing to avert compulsory liquidation, which you’ll doubtless have had several opportunities over a considerable amount of time to act, may well not be looked on favourably and there are sanctions available for Directors deemed to have behaved improperly.
No matter what stage you’re at, your situation will be improved by speaking to a licensed insolvency practitioner. We deal with all kinds of businesses in financial trouble and are well practiced in improving matters. While some challenges are so great and some problems so severe that saving a business may not be possible, our involvement guarantees that the ultimate outcome, whatever that might be, will be far better than the alternative.
We offer a free consultation to discuss your business insolvency, no matter which stage it’s reached. We’ll advise what might be possible to be done and how we can improve matters. Speak to us today to find out what we can do to you.