If your business’s relationship with your 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 notice that your company could be insolvent,it is advisable to take immediate action to stop more damage from occurring,like for instance the complete dissolution of the company. Your company can still do business despite it being insolvent,but this will need you to make agreements with your creditors who otherwise will pursue your company. Below is some company insolvency tips 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 allows a company time to repay all or part of the debt owed to their creditors,within an agreed 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 operating. Most creditors do not like to use this agreement because of the associated costs,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 getting their monies in the future.
In other cases,a business may select to have a meeting with the creditors and have an informal agreement. This option mostly works if the business is experiencing short term 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 as soon as you see any signs of insolvency,explain the issues to them and work on a repayment plan that is realistic and achievable. Remember this procedure is not legally binding and so the agreement could be stopped at any time. You must ensure you work towards paying the amount you owe them within the stipulated time to avoid [problems