If your building or construction company faces financial or operational difficulties, acting quickly at the first signs of trouble could mean the difference between rescuing your business or having to close it permanently.

Even though construction is a high-demand industry, construction businesses encounter several challenges to stay stay good. These include the VAT reverse charge and frequent late payments, which are widespread issues in the sector.

This situation can strain cash flow to its limits, even for the most profitable companies. However, during periods of heightened financial pressure, the outcome can be catastrophic.


How do you close your building and construction company via the liquidation process? 

If your construction company faces operational disruption, with halted projects affecting cash flow, you might be weighing your options. If your construction company is insolvent, or you foresee insolvency soon, it’s crucial to comprehend the options for closing down the company to safeguard creditors.

When your construction company becomes insolvent, your focus must change. You can no longer prioritise the interests of the company and its shareholders/directors. Instead, you have a legal duty to safeguard the interests of your outstanding creditors and prevent any further financial losses for them.

If your construction company becomes insolvent, your priority should be seeking advice and guidance from a licensed insolvency practitioner. They can provide an impartial assessment of your company’s financial situation and advise whether closure would be the best course of action for all involved parties.

If necessary, this can be accomplished by voluntarily placing the company into liquidation through a formal insolvency procedure known as a Creditors’ Voluntary Liquidation, or CVL. The liquidation of a construction company must be overseen by a licensed insolvency practitioner, and it signifies the final closure of the company.

All employees will be made redundant, company assets will be sold to benefit creditors, and any remaining debt will be forgiven, unless secured by a personal guarantee for the borrowing.

Though liquidation is a final option, if your construction company is unlikely to recover promptly, it might be the most suitable choice. Ultimately, it can be the best outcome for both your employees, who may claim redundancy, and creditors, who may recover some owed funds.


How do you rescue your building and construction company? 

If you wish to explore perfect options to rescue your construction company, a licensed insolvency practitioner can discuss your options with you. Just because your business faces financial and operational challenges doesn’t necessarily mean it cannot be revived.

An insolvency practitioner must initially assess the viability of your construction company. If it is viable, they will delve into the challenges that led to your current situation and explore ways to mitigate them.

If irregular and unpredictable cash flow is causing difficulties in meeting payments to staff, creditors, and HMRC, strategies can be insert to ease this burden.

Late payments of invoices are a common problem in the construction industry, ranging from being an annoyance to potentially financially ruinous. Invoice financing could serve as an ideal solution, provided the business is otherwise operating successfully. 

Invoice finance enables you to access a predetermined portion of your unpaid invoices promptly, whether they are already outstanding or issued in the future.

While the invoice factoring company will keep a portion of the funds as payment for their services, the peace of mind and predictability this arrangement offers to your company could be invaluable. Having clarity on what you’ll receive and when enables better forward planning, especially regarding stock purchases and maintaining sufficient cash reserves to cover business expenses.

If your construction company has faced financial challenges from escalating costs and fallen behind with creditors, engaging in formal negotiations could enable restructuring of existing debt to a more manageable level.

This can be accomplished through a legally-binding insolvency solution called a Company Voluntary Arrangement (CVA). Typically lasting between 3-5 years, this arrangement offers a viable business the chance to renegotiate payment terms and existing lease agreements, enhancing the company’s prospects of survival.

This type of arrangement can benefit both the company and creditors. Companies can substantially reduce their monthly payments, while creditors gain assurance that they will recover a substantial portion of the money owed, even if it takes longer.

Another option to explore is placing your construction company into administration if more time is required to develop a robust plan for the future. This could involve simplifying the business, especially if it has a complex operational structure that needs streamlining to enhance overall efficiency.