When a business is failing, bills are not being paid and problems are getting worse – it’s time to seek help and professional advice at the earliest possible opportunity. This is particularly important when business is still continuing; a director can be accused of ‘wrongful trading’ or ‘fraudulent trading’. In both cases the directors are at risk of being held personally liable for the debts.
What do you do if you are owed money by a business and they will not pay you back? The usual route is to apply to Court and if the claim is less than £10,000 you can use the small claims Court. This has the advantage of being cheaper to pursue especially if the debt is disputed and there is a risk you may lose in Court. Claims above £10,000 usually require a solicitor on both sides and there is a risk that if you lose you may end up paying the winners costs as well as your own.
When Directors seek advice from an Insolvency Practitioner it is often because their business is already insolvent, but they also come because the business is going to be sold and they believe that the workforce can be slimmed down and then the slimmed down version of the business can be sold, perhaps back to themselves as a ‘pre-pack’. The realisation that they will adopt all of the employee’s contracts often scuppers a sale of the business.