When to tell staff your company is insolvent?
If your company is on the path to insolvency, one of your primary concerns may revolve around the implications for your employees. If your company’s financial difficulties persist, you might need to contemplate the possibility of permanently closing your company, leaving your staff without employment. Delivering this news is a challenging responsibility, but it’s crucial to do so promptly once the future trajectory of the company has been determined.
What to do when insolvency is unavoidable?
All businesses experience fluctuations, and to minimise unnecessary stress, it may be wise to wait until you’re absolutely certain that the company has no future before informing your staff. However, once you’re certain that closing the company is inevitable, it’s crucial to prioritise delivering this news to your employees promptly. This allows them time to process the situation and begin planning for their future beyond the business.
Depending on the business’s size and structure, rumours about the company’s imminent closure may circulate widely.
The uncertainty can be one of the most challenging aspects for staff, as they remain on edge and worry about an uncertain future. Minimising this uncertainty as much as possible is beneficial for all parties involved.
Who will Notify your employees?
When conveying the news, it’s crucial to be transparent and forthright about the situation, while acknowledging the seriousness of the matter and considering the potential ripple effects it may have on their lives.
If your company is undergoing winding-up proceedings by a creditor or if you’re closing the business through a Creditors’ Voluntary Liquidation (CVL), an insolvency practitioner will manage the process.
If you’re unable to personally deliver the redundancy news to your staff, perhaps due to the swift closure, the appointed insolvency practitioner will update them on the company’s status and inform them of their redundancy. Additionally, the insolvency practitioner will clarify their eligibility for redundancy pay and other statutory entitlements, providing them with the necessary forms to initiate the process.
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When should you seek professional advice?
If your company is approaching insolvency and you’re worried about its impact on your staff or uncertain about how to initiate the process, it’s advisable to reach out to a licensed insolvency practitioner for expert assistance and guidance.
They can assess your situation and advise you on whether liquidation is the most suitable option for your company or if there are alternative solutions available. If liquidation is deemed necessary, they will explain the implications for your employees and help you navigate this situation effectively.
Vanguard Insolvency boasts a nationwide network of licensed insolvency practitioners ready to assist you in determining the most appropriate course of action for your company and implementing it effectively. Contact our knowledgeable advisers today to schedule a free, no-obligation consultation. With an extensive network of 100 offices, we offer confidential director support across the UK.
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.