Insolvency options for limited companies
If your company is unable to pay its debts, you should take financial and legal advice. There are several options for limited companies, including:
- Informal arrangements
- Informal 'family' arrangements
- Company voluntary arrangements
You may be able to obtain a moratorium to give the company to provide an opportunity, free from creditor pressure, to consider these and other options. You will need to engage an appropriately qualified insolvency practitioner to provide the necessary statements which have to be filed with the High Court to obtain a moratorium and to act as monitor during the moratorium. A moratorium lasts for 20 business days but this period can be extended in various ways. For example, with creditor consent a moratorium can last for up to one year.
Involves writing to all your creditors to see if an acceptable agreement can be reached. It is advisable to include a timetable of when payments will be made.
Informal 'family' arrangements
Where family and friends may be prepared to give or loan cash or provide guarantees to help in the short term. Creditors may be prepared to agree to this.
Company voluntary arrangements
This is a formal version of the informal arrangement. The company directors need to apply to the court with the help of an authorised insolvency practitioner (IP). The IP supervises a meeting with creditors to agree a repayment plan which must be adhered to.
If you are advised by your accountant or solicitor that no arrangement or period of administration is likely to save your company, then you or your creditors may propose liquidation.