Exploring the viable option to keep my company trading?

If your company is having financial difficulties and you’re dealing with creditor threats and legal action, you might think Liquidation is unavoidable. 

However, even if your business is close to collapse, there are still some options that don’t require shutting down your limited company.

The appropriate process will vary depending on your specific situation, but regardless of the path you select, swift action is crucial. 

If you delay, a Winding Up Petition might be filed against you, compelling the closure of your company.


What are the alternative methods for Liquidation?

1.Negotiate an informal creditor arrangement

If you have creditors whom you find challenging to repay, consider negotiating an informal repayment plan. Many creditors are willing to discuss such plans because they are more cost-effective and less time-consuming than pursuing legal action against you.

This arrangement is more likely to succeed if you owe relatively small debts to one or two parties. 

You can negotiate directly with the creditor yourself, making it a straightforward way to settle your debts.

The risk with this arrangement is that it’s not legally binding, meaning your creditor could withdraw at any time and petition to liquidate your company. However, if you adhere to the terms of the agreement and make payments promptly, this could be an effective method to settle your debts and continue trading.


2. Arrange a Time to Pay (TTP) arrangement with HMRC

If HMRC is one of your creditors, it’s crucial to act swiftly. HMRC possesses various powers to recover debts, including compelling companies into Liquidation. Ignoring HMRC’s warnings may prompt rapid legal action.

Similar to other creditors, HMRC generally prefers reaching a repayment agreement rather than investing time and resources in instructing bailiffs or the Official Receiver. 

HMRC might allow you to establish a ‘Time to Pay’ arrangement to settle the money owed through instalments, provided it believes you can sustain the repayments.

Before contacting HMRC, it’s essential to have a clear understanding of what you can feasibly afford to repay in monthly instalments over a standard period of up to 12 months. 

If HMRC approves your proposal, you won’t incur late payment charges, but interest will be added to your outstanding bill.


3. Propose a Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is another option for repaying creditors gradually. In this instance, it’s a formal, legally binding arrangement that provides a typical period of three to five years to repay your creditors through manageable instalments.

One of the significant advantages of a CVA compared to an informal repayment plan is that once the arrangement is in place, your creditors cannot initiate or pursue legal action against you. 

Your debt won’t accumulate interest or fees, and typically, a portion of the debt will be forgiven at the end of the repayment period.


A CVA can serve as an effective measure to halt a Winding Up Petition. Even if Liquidation seems imminent, you might still have the opportunity to negotiate a CVA. A licensed insolvency practitioner will assist you in devising a payment proposal tailored to your company’s financial circumstances.

If 75% of creditors (by value) approve your proposal, all legal proceedings will halt, enabling you to repay the money owed while sustaining your trading activities.


4. Enter into Company Administration

Company Administration presents an alternative to Liquidation when your business faces significant financial strain but still holds potential for survival. Instead of shutting down the company, the Administration seeks to salvage the business through a restructuring process.

You can initiate Administration either before or after receiving a Winding Up Petition. 

Once an administration order is granted, an administrator assumes control of the company, and a moratorium is implemented to stop any legal actions by creditors.

During this period, the administrator has the opportunity to evaluate the company and develop a strategy to salvage it. This may involve restructuring debts, renegotiating leases and contracts, or shutting down unprofitable aspects of the business. If the administrator is unable to rescue your company, it will transition from Administration directly into Liquidation.


5. Arrange a Pre-Pack Administration

In case your business is insolvent but still remains viable, a Pre-Pack Administration enables you to essentially relaunch the company under a new entity, free from the debts of the old company.

In this procedure, you negotiate and finalise the sale of assets before officially appointing an insolvency practitioner. 

Once the IP is appointed, the assets are transferred to the new business promptly, allowing for uninterrupted trade. Often, the purchaser of the insolvent company’s assets comprises some or all of the existing management team.

This process is geared towards preserving jobs, maintaining supplier contracts, and ensuring uninterrupted service for customers. Additionally, it can offer a more favourable return for creditors of the insolvent company, who benefit from the proceeds generated by the sale of assets.

Crucially, Pre-Pack Administration becomes unavailable once your company receives a Winding Up Petition, as assets cannot be sold or transferred thereafter. Therefore, swift action is necessary if you intend to pursue this option.


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How can we help you?

If you’re concerned about overwhelming debts and seek to steer clear of Liquidation, we’re here to assist you.

 Reach out now for a confidential discussion with an experienced advisor or schedule an in-person meeting at one of our offices nationwide.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.