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Rescuing Your Business: Options to Avoid Administration

Rescuing Your Business: Options to Avoid Administration

Businesses that run into serious money problems usually have a few options to get through them. The best way forward depends on the specifics of the situation. One common solution is going into administration. This has pros and cons and isn't always the right choice, but can it be avoided altogether? 

Let's take a closer look at how you can steer clear of administration.

Acting early

The most effective way to avoid going into administration is to take early warning signs of financial ill health seriously. These could be growing debts, increasing cash flow issues, declining profit margins due to rising costs, or any number of other factors.

If you can spot these potentially major issues early on and take action, you should be able to avoid going into administration. That doesn’t mean it’ll be easy - you may need to make massive changes to your business, and even then, there’s no certainty that they’ll return your organisation to a state of profitability. 

Pursuing other options

If your business does find itself seriously indebted, there are also a number of other alternatives to administration that can help you sort things out. While you’ll need to consult an insolvency expert like Chamberlain & Co for more precise advice, these are a few other options that could be available to you.

Liquidation

If your business has reached a certain level of indebtedness, and there is no reasonable chance that you’ll be able to repay those debts by running the business, you may be forced into liquidation rather than administration. 

Your business will be struck off the register at Companies House, and you will be forced to cease your operations. The assets of the business will be sold off, and the proceeds will be distributed to the creditors in legal order of priority.

Company Voluntary Arrangement 

If the business in question is able to negotiate with the creditors and persuade them that they will be able to repay their debts, they may be able to enter into a Company Voluntary Arrangement, or CVA. This will enable the company directors to remain in control, and for the business to continue trading in order to pay off its debts.

Of course, certain changes may be necessary to increase profitability, but this will largely be in the hands of the existing directors.

Time to Pay arrangement 

Another option that’s available for some tax debts is to pursue a Time to Pay arrangement. This will allow your business to restructure its debts to HMRC, allowing them to be paid off over a different, hopefully more manageable time frame.

It’s vital that you get advice from an expert if you find yourself in these kinds of situations. There are a number of options that you may be able to pursue, and it’s important that you take the time to choose the right one.

Topics: Legal Business Advice

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