Factors to be considered when facing financial difficulties...
An inability to pay bills when they become due or having County Court Judgements entered against it are viewed as indicators that a company is insolvent. The Directors are required to take prompt action.
The action may take the form of re-financing the company enabling it to continue to trade or proposing an informal or formal arrangement (a Company Voluntary Arrangement) to its creditors.
If such an arrangement is not possible, the company should stop incurring further credit and ensure the position does not get any worse. The Directors have an obligation to act to protect the interests of the creditors, not themselves or the shareholders.
If the decision has been taken to call a Meeting of Creditors in order to place the company into liquidation, Directors should be particularly careful to ensure that the financial position for creditors does not get any worse. Usually this means that the company should stop trading. This, though, may be delayed if it will help in completing contracts, collecting book debts or in some other way be of benefit to the creditors.
These circumstances involve serious responsibilities for directors, so advice should be taken as soon as possible.
If you have concerns in this area, please contact us.
Fax: 0161
438 8554