A Guide to Rescue, Recovery, and Closure Options for Transport Companies

A reliable and sturdy transportation system is crucial for businesses to operate smoothly. It helps people reach work, enables companies to receive deliveries, and keeps operations running smoothly. 

But changes in work culture favouring remote work, a lack of drivers, and economic uncertainty are posing unprecedented challenges to the industry.

If your transport business is facing operational or financial difficulties, it’s crucial to seek expert advice on insolvency and restructuring as a top priority. This will not only speed up a potential turnaround if the business is viable but also provide clarity on your personal situation if the company cannot continue.

How can you close your transport company by using the liquidation process? 

If you manage a taxi company, run public transport services, or organise coach tours, a decline in demand may lead you to ponder the future. Depending on your transport company’s financial status, you might contemplate liquidation if the situation fails to improve promptly.

If your company is insolvent and you see no realistic chance of improvement soon, liquidation might be necessary. As directors of an insolvent transport company, you have specific legal responsibilities that must be fulfilled.

One of your responsibilities is to prioritise the interests of the company’s creditors over those of its shareholders to prevent them from incurring additional financial losses.

An insolvent company undergoes a formal procedure called a Creditors’ Voluntary Liquidation (CVL), which can only be initiated under the supervision of a licensed insolvency practitioner acting as the company’s liquidator.

During a CVL, the insolvency practitioner bears several key responsibilities. They will handle all communication with creditors and identify all assets owned by your transport company.

Given the nature of your business, the assets are likely to mainly consist of vehicles. These assets will undergo independent valuation before being sold, often through an auction process. The proceeds from asset sales will be distributed among creditors before the company is methodically wound down. At this stage, it will cease to exist as a legal entity and will be deregistered from the Companies House register.

Any outstanding company debt at the time of liquidation will be written off unless you have secured the borrowing with a personal guarantee. In the event of a personal guarantee, the responsibility for repayment transfers from the company to you personally upon liquidation.

If you suspect you’ve provided a personal guarantee for company borrowing, it’s essential to discuss this with your insolvency practitioner. They will help you grasp the implications of liquidating in such circumstances and explore options if you cannot repay the borrowing.

How can I rescue my transport business? 

When the fact is about rescuing a financially distressed transport company, it may explore various options, each tailored to the specific situation. What works for one company might not suit another. 

At Vanguard Insolvency, our team of licensed insolvency practitioners and business turnaround experts invests time to comprehend your company, its current challenges, and the factors contributing to these difficulties.

Through this personalised approach, we ensure that the devised plan not only stabilises your business presently but is also aligned with your future aspirations, whatever they may be.

If you’re optimistic about the future, securing a commercial loan could help bridge the cash flow gap resulting from previous months of business interruption. Funding options include government-backed loans like CBILS or Bounce Back Loans, as well as asset-based lending or invoice discounting arrangements.

Vanguard Insolvency boasts a team of commercial finance experts who can guide you through the commercial lending landscape, assisting you in finding the most suitable and cost-effective funding solution for your transport business.

Depending on the severity of your current financial concerns, your transport company may have fallen behind on payments to creditors. In such cases, initiating discussions with your creditors to arrange an affordable and sustainable repayment plan could be the best course of action.

This can be accomplished through informal talks or through a formal negotiation process facilitated by an insolvency practitioner. For those with numerous outstanding creditors who still view their business as viable in the long term, a Company Voluntary Arrangement (CVA) may be appropriate.

A CVA is a formal insolvency procedure that, upon creditor approval, becomes legally binding on all parties involved. Typically lasting between 3-5 years, CVAs entail the indebted company making agreed monthly repayments towards its debts, overseen by the appointed licensed insolvency practitioner.

Depending on the company’s repayment capacity, a portion of the debt may be forgiven as part of the process, while the remaining amount is restructured into a more manageable payment plan.

While CVAs can provide companies with the necessary time and financial flexibility to regain profitability, it’s important to note that they are not suitable for all businesses. To implement a CVA, at least 75% (by value) of creditors must consent to the arrangement.

All that can only be possible if creditors are persuaded of the company’s future prospects and confident in the proposed repayments throughout the CVA period. If creditors doubt your company’s viability, they may block the progress of the CVA.