Running a successful business can be stressful, especially when said business falls into hard financial times. When a company approaches insolvency there are several responsibilities of a company director.
We’ve listed six steps you should take when your company is facing insolvency.
Be Transparent With Creditors:
Creditors should always be one of the first points of contact, as it is your duty as a company director to act in the best interest of any creditors. Initiating an open and honest discussion about insolvency should allow you to gain their trust.
It’s important to minimise as much loss to the creditors as possible and providing them with accurate information as quickly as possible will not only help to reduce this loss, but it will ensure lines of communication are kept open too.
Don’t Use Your Own Money:
As tempting as it might be to use your own money to save the business, it can have serious repercussions on your personal finances especially if it doesn’t pay off.
The nature of a legal business means the limited liability of it is a completely separate entity from you, the company director. The only way you would become liable is if the business has been conducted improperly.
Seek Professional Advice:
Knowing exactly what to do when it looks like your company is becoming insolvent is difficult, and it can be hard to actually face the reality of insolvency. However, seeking help from professional insolvency practitioners will help you during the insolvency process, and also ensure there are no accusations of trading whilst trading.
As a company director, you may wish to carry on trading to reduce the chances of becoming insolvent, but it is an area which requires professional support and advice to keep everything legal.
Keep Records Of Meetings:
It’s a good idea to have meetings throughout the insolvency process in order to keep everyone informed about any progress that is being made, or if there is a change in the situation.
Demonstrating that you are closely monitoring the situation and taking notes during meetings is a great way to show that you are committed to dealing with the issues. Making notes or recording meetings is also a great way to explain why decisions are made, and what steps are going to be taken to recover and control the situation.
Keep Clear Financial Records:
If a company’s records are clear, it may help to shorten the investigation into insolvency. You should have readily available access to any financial records, and they should be both accurate and detailed.
Your accountant should be able to assist you in gathering and organising this information.
Protect Company Assets:
Company assets must be secured and protected. Any company directors who sell their assets, or try to dispose of them, can face allegations of misconduct during an insolvency investigation.
This can include moving the assets to another company and giving them to creditors instead of the money that is owed.
Knowing where to start when you are facing insolvency can be difficult, however, following the basic steps above should help. Remember, it’s always best to seek professional help from the start of the process in order to proceed within the law.
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