Insolvency worries? Take professional advice early
Many businesses are set to suffer due to the impact of social distancing and self-isolation, with industries such as travel, retail and insurance being some of the hardest hit.
The effects of the coronavirus on businesses will likely see those already struggling pushed into greater financial difficulties, and in the worst case scenarios, insolvency.
With the disruption comes a myriad of questions and worries for business owners about what they can do in such unprecedented times – and how to ensure that any problems stay short term and don’t stretch into the future.
Our advice at present is the same as always – take early advice. Please talk to your solicitor, your accountant, banks/lenders and your usual professional advisors. By recognising the early signs and seeking advice, a company has a chance to put an action plan in place to minimise the adverse consequences of the current climate.
For most businesses the main impact will be operational due to the Government’s advice on self-isolation, therefore many business owners/senior management are now, if not already, considering what measures they can put in place to maintain ‘business as usual’ and financial viability, but whilst the health and safety of employees is paramount, senior management must also be mindful to ensure the health of the business.
Essentially, a director has duties to act in the best interests of the company, and also in the best interests of creditors in times of financial distress.
Should a business fail for any reason, let alone restrictions caused by coronavirus, as a business owner or director there are things you can do to protect yourself from subsequent insolvency claims
Do not panic. There are lots of pro-active steps you can take to minimise the impact on your business.
Take advice early. If you are in any doubt about the viability of your business now or in the future, speak to your trusted professional advisors about what to do next.
Talk to your key staff, suppliers and creditors about the situation. Most will understand and be in a similar situation themselves.
If insolvency is the way to go, be mindful of potentially creating personal liability for the directors by paying certain creditors (including yourself) over others and/or misusing the Company’s limited funds in time of crisis. Funds should be preserved for the benefit of all creditors!
Talking to an insolvency practitioner does not mean the business will end up in an insolvency process. First and foremost an insolvency practitioner will try and save a business. We work with insolvency practitioners all over the country so can put you in touch with the right person for you and your business, depending on its size and its sector, and we will work alongside you to ensure the best solution is achieved.
In these unprecedented times, balancing employee health and business health will be very challenging. For any clients experiencing financial issues due to the coronavirus, we are here to help, advise and can signpost you to the best support. Please contact us on 0845 287 0939 during office hours or 07515 930 374 anytime or via email to mark.hague@farleys.com
