When should I call it a day on my business?

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A common mistake when people are considering closing their business is to think that everything boils down to the accumulation of too much debt.

Much to the contrary, insolvency legislation is intended to help company directors and business people. When a company runs into financial trouble, things can be restructured in a manageable way.

The first thing to do if you think your business is headed in this direction is to find trustworthy advice as quickly as possible. As determined by the 2006 Companies Act, directors are under an obligation to act in a way beneficial to the company they run, without damaging the value of its shares. If a director continues to act in a way which he knows to be detrimental to the company, he is acting explicitly against the law, and could face serious consequences in the future.

There are a huge number of formal and informal actions a company director needs to take into account before deciding what to do to orgainse his business’ finances. Informal options include taking out a loan or negotiating with creditors regarding payback dates. Formal options could be entering into administration, restructuring or voluntary liquidation.

Hoping that debts will simply go away simply makes it more liklely that creditrs, such as HM Revenue and Customs, turn up and start confiscating company property. Another possibility is forced liquidation, which would leave the government in charge of the liquidation process.

If your business is going through a similar situation to the one described above, be aware that there are legal solutions which allow you to deal with your problems without facing closure. This way you can start thinking about what to do to move on, without the weight of unmanageable debt hanging over your shoulders.

THERE IS A SERIES OF FACTORS WHICH OFTEN LEAD TO A COMPANY GETTING INTO TOO MUCH DEBT:

  • Cash flow difficulties
  • Bad credit
  • Pressure from HM Revenue and Customs / other creditors
  • Billing notifications or threats of legal action
  • Sudden and unexpected loss of important contracts
  • Maxing out the limit of a bank account or outstanding loans

Keep yourself informed and alert and don’t hesitate to search out specialist advice when necessary!

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About Author

Bianca Lupoli Edwards

Bianca is from Mato Grosso do Sul - Brazil, loves travelling, photography, blues and bossa nova. She always has her finger on the pulse when it comes to economics, finances and she is also fascinated by the world of public relations and criminology science.

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