Every year, tens of thousands of businesses experience severe debt problems with thousands entering liquidation.However, liquidation is a last resort and alternative options should be sought in order to ensure that the all available options are assessed before big decisions are made. Getting the right company rescue advice could be the difference between a business entering into liquidation and a turnaround success.
Here are some of the main options that are chosen by businesses looking for company rescue advice.
A CVA is a contract between an insolvent company and its creditors, and allows a business to pay a proportion of its debts through future profits. This option is appealing, as it allows a company to continue trading as normal, rather than being wound up or liquidated. It also offers creditors the chance to see the money that they loaned returned, rather than seeing the company wound up or liquidated. Businesses seeking to proceed through a CVA route for their company rescue must be able to display potential for future profit, however, which may be difficult.
Prepack Administration is when an insolvent business is sold prior to going into administration or liquidation, in order that the business can keep trading. The insolvent business can be sold to a ‘phoenix’ company, that is a business that has been set up by the existing directors before going into administration, or a third party.
To prevent your business to from entering any further into a downward spiral of financial uncertainty, take a proactive stance. A business turnaround plan will need to be set out as soon as possible to give your business renewed direction.