It's fair to say 2020 has been a particularly challenging year for businesses, across most sectors. The closing and re-opening of premises, adapting business set-ups and procedures, downturns in customer numbers – all of these things have created new financial pressures.
Unparalleled levels of support have been provided by government, but the economic ramifications of the pandemic are being felt across the country, so it might seem like you're hearing terms like 'gone into administration', 'liquidation', 'pre-pack' or 'company voluntary arrangement', more than you've ever heard them before.
Unless you've been involved in any of these processes before, even the term 'insolvency' might raise questions. Ultimately, it means being unable to pay the debts you owe – and when that happens, it can trigger legal processes designed to help recover debts for creditors and provide debt forgiveness. There is a degree of unfamiliarity about what the restructuring and insolvency processes are, and as a result there can be misunderstandings about what they mean for a business in financial difficulty.
For instance, insolvency does not necessarily mean 'the end' – and it's important to know that there are options available to help struggling businesses across all sectors, including leisure, and hospitality, retail and manufacturing. Those options can range from securing a type of arrangement to enable a business to continue operating while paying creditors what they're owed (known as a company voluntary arrangement or CVA), through to arranging a deal to sell assets to another business (known as a pre-pack). Whether they are the best solution really depends on the circumstances of the business – what works for one case, may not work for another. But that is where an insolvency practitioner or insolvency lawyer can advise.
To give you a better understanding of some of the concepts being discussed in the media and in your markets, our restructuring & insolvency lawyers have put together a series of articles, Q&As and top tips, that will be shared on social media this week.
We'll look at:
- top insights on what to do and what you should know to help look after your business' future;
- the duties expected of a director - even when their business is struggling financially;
- what exactly happens when your company becomes insolvent - and why businesses need to let go of any stigmas they have about insolvency; and
- a restructuring toolkit, to highlight the various measures that can help a business to survive.