Insolvency During Covid 19
In light of the recent changes to Insolvency Law we look at what steps must be considered for your business if you are suffering from cash-flow difficulties.
Businesses have shown grit and determination to overcome the challenges are result of national and local restrictions. However, in this unprecedented time, this has significantly added financial pressures, which has led business owners to review the options concerning redundancies, restructuring or insolvency.
Key issues are:
Forecasting cash flows
Managing creditors, and
An increase in debt in relation to HMRC, landlords, creditors, and loans.
Recent Government changes to Insolvency law
In June 2020, the Government put in place some temporary and permanent measures made changes to Insolvency law.
What can you do?
You must continue forecasting cash- flow on a weekly basis. Contact LMS to help guide you through this process.
If forecasts show you can no longer meet liabilities and need further support, contact LMS immediately.
A Restructuring Strategy is an arrangement with a company’s creditors and is an option for companies which are going through financial difficulties or anticipate this in the future.
A company does not have to be insolvent for a Restructure Strategy. A Restructuring Strategy can be proposed by the company, its shareholders or its creditors.
Insolvency & CVA
Insolvent means that the company is either unlikely or will become unlikely to settle its debts as and when they fall due; or that the company’s debts exceed its assets. If your limited company is insolvent, it can use a Company Voluntary Arrangement (CVA) to pay creditors over a fixed period. If creditors agree, your limited company can continue trading.
A company can get financial assistance from The Insolvency Service from the Government towards the costs of making staff redundant, should a Company be in CVA, however, this must be paid be paid back.
The Redundancy Payments Service will cover employees’ claims as long as the company properly operated payroll for its staff which is either PAYE or the CIS scheme.
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