If you can’t pay company suppliers and want to liquidate today, then we may be able to help you with your insolvent company. Potentially, this could be done today by initiating a procedure called creditors voluntary liquidation, if your company is unable to trade out of the problem.
When a company is insolvent, the Creditor Duty is a key responsibility for directors that must not be overlooked. Director need to act in the best interests of suppliers. If the company has passed the point of no return, then liquidation may be unavoidable and creditors voluntary liquidation may be appropriate for you. However, other options should also be considered to see if the company can be rescued.
What Is A Creditors Voluntary Liquidation?
What is creditors voluntary liquidation (CVL)? This is the formal process of winding up a company that cannot pay its suppliers and other debts when they fall due. It involves appointing an Insolvency Practitioner as the Liquidator who will take full control of the company, realise the assets and pay over to creditors any surplus funds after discharging the expenses of liquidation in accordance with the statutory order of priority in insolvency procedures.
If you can’t pay company suppliers, a CVL is a formally recognised procedure available to potentially close down a company. Its availability arises from the Insolvency Act 1986.
Don’t Bury Your Head In The Sand
It is inadvisable for a director to ever pretend the problem doesn’t exist. Debts due to suppliers will not simply disappear, and allowing debts to mount up without taking action can lead to accusations of wrongful trading, which can lead to a director having to compensate a company for some of its losses run up during such a period.
Once a company cannot pay its suppliers and is insolvent, then that is the time to take independent professional advice so the director can protect the creditors from further losses and themselves from the risk of making the situation worse. The director’s Creditor Duty to act in the best interests of creditors is triggered at the point that insolvency is a very real likelihood. It does not have to be completely inevitable.
If the company is insolvent, then it can be risky, even though potentially tempting to prioritise critical suppliers for payment because, in the event of insolvency, allegations of preferential treatment can be levied.
Review Your Finances and Cut Costs Today
Now is the time to scrutinise your cash flow. Can you reduce outgoings, pause non-urgent spending, or restructure existing debts? Sometimes, just a few small cuts can free up enough funds to ease supplier pressure. Be realistic about what’s coming in and going out. Use this to create a short-term survival budget.
Negotiate Payment Terms Without Delay
Speak to your suppliers about setting up payment plans or instalments. Offer something rather than nothing, even a partial payment, shows good faith and could prevent escalation. Be honest about your situation but also make sure you don’t promise more than you can deliver.
Ultimately, if suppliers cease to supply goods and services, the business can grind to a halt and be unable to continue trading.
Explore Finance Options
If your business has short-term company cash flow problem but otherwise has a profitable core business, there may be finance solutions available. This could include invoice financing, business overdrafts, director loans and equity finance from existing shareholders or even assistance from family and friends. Be cautious, though; taking on more debt only makes sense if you have a realistic path to repayment.
Other Formal Insolvency Procedures
If your company cannot realistically recover and pay the suppliers, it may be time to consider other formal insolvency procedures authorised by the Insolvency Act 1986, such as:
- Company Voluntary Arrangement (“CVA”): A negotiated deal where creditors agree to accept reduced or rescheduled payments over time.
- Administration: Used when there’s a viable business to rescue or sell as a going concern, protecting the company from legal action while options are explored.
- Compulsory Liquidation: Is a way to wind up a company through the court using a winding up petition. Sometimes it can be less expensive to a CVL, but the directors will then have to attend on the Official Receiver at the Insolvency Service to deal with the winding up.
- Voluntary Strike Off: Although generally unsuitable for a company with unpaid debts, it is possible to close down a company using the strike off procedure at Companies House through the DS01 form, provided the rules are strictly complied with.
Contact Us For Help Today
If you can’t pay company suppliers, you are not alone, but do not ignore the issue, as there are options. The earlier you seek advice, the more choices you’ll have and the better the chance of minimising damage to yourself and your business. Liquidation should ensure you can close the company in a controlled, orderly way, but handing it over to a liquidator, such as someone like Oliver Elliot’s CEO, Elliot Green, to ensure an orderly winding up of the company takes place.
We can offer you a free initial conversation. Our advice is strictly private and confidential. You will get clear advice on your situation and find out whether liquidation is the right option for you. If indeed it is, then we can set about getting the ball rolling to start to liquidate your company today.
Whether it’s informal restructuring or full liquidation, the right solution depends on your specific situation. Delaying only narrows your options and increases risks.
