The table below sets out the key advantages and disadvantages of the options available to you as a Director when considering the future of the company. This is provided only as an overview and is not intended to replace tailored advice.
Advantages
The “easiest” option and there are no formal insolvency procedure costs to cover.
Disadvantages
This is a high-risk approach. If the company subsequently enters into a formal insolvency procedure, you could face disqualification and personal liability for continuing to trade whilst insolvent.
Advantages
If the company is facing short-term difficulties, you may be able to take steps to reach an informal agreement with creditors to postpone or re-structure debts and give the business time to recover.
There are no formal insolvency procedure costs to cover.
Disadvantages
You and your creditors must comply with the terms of the agreement. Personal guarantees or other securities may be insisted upon by your creditors as a condition for their support. Again, if the company subsequently enters into a formal insolvency procedure, you could face disqualification and personal liability for continuing to trade whilst insolvent.
Advantages
There are a wide range of re-financing options available.
Disadvantages
The range of re-financing options available will depend on the company’s credit history, its free assets to offer as security, its other borrowings and your willingness to provide personal guarantees.
Advantages
If the company has a strong brand identity or intellectual property, it may be possible to sell the business to a third party who is also willing to take on the liabilities.
Disadvantages
Any potential purchaser may only be interested in certain assets and may not be willing to assume responsibility for the liabilities.
Legal, agents and other costs will be incurred.
Administration is an insolvency procedure that protects your company against legal pressure from its creditor.
Advantages
This process can allow the business time to either put in place financial restructuring to rescue the company, or to sell the business and assets to produce a better result for creditors than liquidation. It can also be used to liquidate the company’s assets and distribute the proceeds to secured or preferential creditors.
Disadvantages
Administration costs can be very costly and typically start from £25,000. A report is made to The Insolvency Service/TIS on the conduct of every director of the last three years and TIS may seek a disqualification order.
A CVA is a procedure which enables an insolvent company to reach a formal agreement with its creditors to delay or compromise the payment of its debts.
Advantages
A CVA is flexible and can be adapted to meet the needs of any business.
There is no requirement to make a report to TIS regarding the conduct of the directors and former directors.
Disadvantages
It will require the agreement of at least 75% (in value) of the creditors.
If at any point during the term of the CVA the company fails to comply with the conditions, then the company may be forced to enter into administration or liquidation.
The Supervisor’s fees can be costly and can exceed £25,000 dependant on the complexity of the case.
A process where the directors of an insolvent company can voluntarily take steps to wind up the company.
Advantages
The liquidation costs are typically cheaper than the other formal procedures available.
Our costs for an insolvent liquidation start from £4,000 (plus VAT) including expenses.
Disadvantages
Again, a report is made to TIS on the conduct of every Director of the last three years and TIS may seek a disqualification order.
The Court orders that the company is wound up.
Advantages
Typically cheaper than the other procedures, although the Court fee and deposit of £1,880 will need to be paid, along with any legal fees incurred.
Disadvantages
Again, a report is made to TIS on the conduct of every director of the last three years and TIS may seek a disqualification order.
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