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For Businesses in Financial Trouble…
If your business is in financial trouble, you need to act quickly.
There are many options open to you, but you should take expert advice immediately – not least as some form of remedial action may well be a legal requirement. Directors failing to act in a timely manner when a business is in financial trouble may result in them having to make a personal financial contribution to a company’s losses. They may also face investigation by the Department for Business, Enterprise & Regulatory Reform (BERR).
And let’s face it, more businesses are in financial trouble today than for a long time.
Directors need to make a decision on whether the business should cease to trade. Under the law, if a company is trading insolvent, the directors may be liable for wrongful trading - if they knew (or even if they should have known…) that the company couldn’t avoid becoming insolvent. If this is the case, you need to stop trading straight away and take steps to liquidate the company.
But hopefully that isn’t the case. Remember, most businesses fail because they run out of cash. If you’re facing cash-flow problems, there may well be many steps you can take to alleviate your problems as you try to turn around your trading. But again, act now rather than later. Over half of the businesses that fail in the UK do so because of cash-flow problems – not because they aren’t profitable. Of course, a trading profit is vital and fundamental sooner or later - but if you need cash quickly to see out the recession and to stay in the game until things improve, seek expert advice to explore the many options open to you. But do it as soon as you can.