The strong restructuring and turnaround regime that exists in the UK supports businesses that are struggling with cash flow difficulties or experiencing serious financial decline. It helps them to reliably deal with severe financial distress and return to profitability over time.

Restructuring options might include renegotiating debt repayments, for example, selling assets to bolster a company’s cash position, or making redundancies and undertaking other cost-cutting measures to reduce outgoings.

Company administration is typically used by limited companies experiencing significant creditor pressure. Entering administration protects the company from legal action and allows an administrator to develop a plan for the company’s future.

The administrator takes control of the business and an eight-week moratorium provides the breathing space needed to avoid enforced closure. Following the administrator’s input, the company might be guided onto one of the following paths.

A CVA is an official instalment plan negotiated and administered by a licensed insolvency practitioner (IP). It’s a legally binding arrangement for all parties and allows the business the opportunity to trade its way out of financial difficulty without the threat of closure.

Company Voluntary Arrangements are intended to help limited companies deemed to be viable for the future but that are experiencing short-term financial issues. The premise is that the company makes a single affordable monthly payment to the insolvency practitioner, who then divides it between the company’s creditors in the pre-agreed proportions.

Pre-pack administration involves negotiating the sale of a business’s assets before an administrator is appointed. The assets are then sold to a trade buyer or other third party, or sometimes to the directors of the company prior to a new company being set up.

Employee contracts are transferred to the new business under TUPE legislation – the Transfer of Undertakings (Protection of Employment) regulations and the old company is liquidated with debtors being repaid as far as the remaining funds/sale of assets allows.

Unpaid tax liabilities are commonly a significant issue for companies with unmanageable debt but HMRC runs a scheme that helps viable businesses to pay their arrears in instalments without incurring penalties.

The typical three to six months of extra time to pay can be instrumental in helping companies avoid closure but some are allowed even longer to repay – sometimes up to 12 months or more depending on their circumstances and history of timely payment.

With so many forms of business finance available, it’s crucial to find the most appropriate type of funding for a company. Running a healthy sales ledger, for example, suggests that invoice finance could be the best way to improve cash flow.

Other potential funding solutions that can help companies in financial distress include vehicle leasing arrangements, hire purchase, and stock finance, but it’s vital to seek advice from a business finance expert before proceeding with an application.

Company Closure can provide more advice on restructuring and business turnaround. Please get in touch to arrange a free, same-day consultation.