Running a business or a company can be a stressful task. The situation can turn really bleak when the company falls on hard times. If your company runs up a huge debt and creditors start pursuing you in order to get paid, you need to step back and take stock of the situation. In case you find that your company is approaching insolvency, you have to act fast and start dealing with the problem head-on. As the director of the company, it is your responsibility to take effective measures so that you don’t have to face personal liability for the debts incurred by your company. Here are a few tips for directors to deal with company insolvency:
Share information with the creditors
Being the director of a company that is on the verge of insolvency, you have to keep the interest of your creditors at the forefront. Your focus should be on minimizing their loss. While you work on fulfilling this goal, you need to have an open discussion with your creditors. By being open with your creditors and sharing information with them, you will be able to achieve their trust. Do not hesitate to provide them with accurate information when they want to know about something related to the company or its financial status. Keeping the lines of communication open will help you to clear off confusion and allow creditors to become aware of the exact financial condition of the company.
Seek professional advice
You have to be careful about trading when faced with a financial crisis that is heading towards insolvency. Many-a-times it happens that directors dealing with insolvency crisis do not know when they should stop trading. It can be quite difficult to realize when a company shifts from experiencing financial crisis and descends into full-scale insolvency. Seeking the advice of a professional insolvency practitioner can be of much help under such circumstances. An expert insolvency practitioner will be able to understand the situation. He or she will be able to guide you and offer advice regarding how to avoid accusations of trading when the company is insolvent. Acting as the director of the company, you may be under certain obligations to continue trading, such as employee retention. But you need to do so with advice and guidance from experts. If you are looking for an expert professional insolvency practitioner, check out http://poppletonandappleby.co.uk/.
Keep the financial records in order
If you are forced to file for insolvency, it will lead to scrutiny of your company’s financial records. If the financial records can show a clear descent of the company into insolvency, it may result in having a shorter investigation period. That is why it is necessary to maintain accurate and detailed financial records. When the business records are in order, it will become easy for you to handle the difficult process of filing for insolvency. Instead of keeping everything pending until the last minute, get your accountant to arrange the financial records as soon as you suspect that the company may face a financial emergency. This will save you much time and effort when the need to investigate the financial records arises.
Avoid incurring more credit
Directors dealing with company insolvency issues often tend to think that if they incur more credit they will be able to bail the company out of the crisis. This makes them look for sources through which they can get additional credit for the company. But that is a wrong approach to adopt. If your company incurs more credit even as it approaches insolvency, it will deteriorate the overall position of your creditors. Instead of increasing the burden of credit any more, concentrate on bringing down your company’s expenses. Keep in mind that your objective is to reduce the company’s debt and not increase it any further.
Safeguard the assets of the company
When you are in the position of a director, it becomes your duty to protect the assets of the company. That is why you need to insure the company assets and keep them secured. It is not at all a good idea to try to dispose of company assets or try to sell them off during a financial crisis. If you think that you can transfer company assets to the creditors against their debt, know that this step can backfire on you. You can even face charges of misconduct for such an action. In other words, stick to protecting the company assets when your company is heading towards an uncertain financial future.