September 58 - Flipbook - Page 15
NEWS
SAVING YOUR BUSINESS Q & A
Q1: I have creditors phoning every day
of the week chasing for money. We have
more going out than coming in. I don’t
know if I am coming or going and really
cannot see the wood for the trees. Where
should I start?
household items, tools you need to do your
job, a car if you need it to get to work. In
terms of timing, the process usually, takes a
year and in the end all debts will be written
off, however, your bankruptcy will be a matter
of public record.
It is a stressful time for businesses at the
moment and you need to take proper
professional advice quickly. Your accountant
is a good place to start and if they won’t help,
we can put you in touch with an insolvency
practitioner.
Q3:My business is burning cash and I
am concerned it may go bust. What will
happen to my O-licence and do I need to
tell the Traffic Commissioner?
“Cash is king” and your accountant or an
insolvency practitioner can help you with
cash-flow forecasts and establish what your
true financial position is. This will provide a
clearer picture as to how long your business
can continue and also to establish if you are
already trading insolvently, which you must
avoid. As part of the same exercise, you will
be encouraged to identify your businesscritical payments and look at ways to delay
payments if need be.
Once this has been done, your adviser will
help you formulate a plan. This could be
looking at refinancing options with you and/or
if need, be insolvency restructuring.
The recent changes to insolvency legislation
are to try and help businesses in distress,
not make it more difficult. Many of these
protections have recently been extended.
If you are concerned your business is
running out of money, it is likely you may
no longer be able to meet your financial
standing obligations. These are mandatory
and ongoing throughout the lifetime of the
O-Licence and require you to show access
to a minimum level of ‘available’ funds
dependent upon the type of O-Licence you
hold and the number of vehicles it authorises.
The required levels of funds are currently:
• for standard national and international
licence holders - £8,000.00 for the first
vehicle that is authorised (or sought) on the
operator’s licence and £4,450.00 for each
additional vehicle.
• for restricted licence holders - £3,100.00
for the first vehicle and £1,700.00 for each
additional vehicle.
If you are unable to meet the financial
standing requirements, you are required
Q2: I am a sole trader and am worried
to notify the Traffic Commissioner who can
about becoming bankrupt, how does it
grant you a period of grace to allow you time
work and is there another option?
to resolve your financial position. We can
help with this and offer a financial standing
If you are struggling with debt as a sole
health-check product to assist operators
trader, it’s important to search for all types
as the calculations are not always straight
of debt relief solutions before opting for
forward. If you think you are going to become
bankruptcy. The key is to get specialist advice insolvent, you should also notify the Traffic
as early as you can from either your solicitor, Commissioner of this material change in your
accountant or an insolvency practitioner.
circumstances.
They will be able to look at your financial
position and will look at the alternatives to
Q4: I have had no business since
bankruptcy, such as a debt relief order or an
February, but now have some in the
individual voluntary arrangement for example. pipeline. I need some money to keep
us going until we are paid, what are my
Bankruptcy would usually be considered
options?
if you are unable to repay your debts in a
reasonable length of time. Creditors can also Take professional advice as soon as you can.
apply to make you bankrupt if you owe at
Your accountant or financial adviser may be
least £5,000. For some people it draws a line the first place to start for this.
under a usually very stressful time. However,
there are also a number of disadvantages
Look at your cash-flow forecasts to work out
and you will need to consider these. One of
how much you need and for how long. Work
these is that your bankruptcy will stay on your out your business-critical payments. See if
credit file for 6 years after the bankruptcy
can get any payment holidays or reductions
order is made.
in payments with HMRC and other creditors.
It’s important to keep communicating. Then
Bankruptcy includes most of your debts,
look at getting additional finance.
but you should be aware that you’ll need to
surrender your property and assets of high
There are still a few COVID specific schemes
value will be sold to repay what you owe.
around such as the bounce-back loans and
Some items are considered as ‘exempt
CBILS. Otherwise, look at support from your
goods’ though, for example everyday
existing bank (extension of overdraft, loan
or bridging loan). Invoice discounting or
factoring may also possibly be an option for
you. Also, approach your local authority as
although the main government grants have
finished now, there are still a number of grant
and loan schemes existing at a local level.
Also, it is always worth dusting off your
business insurance policy document and
getting this reviewed by your solicitor, as
a recent challenge by the FCA to various
insurers has potentially opened up the door
for more people to claim under their business
insurance because of certain COVID-19
related issues. Each matter turns on its
own particular facts, but this is a change in
direction from the original position adopted by
insurers and is something we may be able to
help you with.
Q5: I am a sole trader and am worried I
will lose personal assets. I have been
meaning to convert to a limited company
but not got around to it. If I do this now,
will it protect me against my business’
creditors?
Incorporation is the act of transferring your
assets and liabilities to a limited company,
rather than remaining a sole trader. This is
one option available to you if you run a UKbased small business, and it can often make
sense, both financially and legally, depending
on your situation.
The main benefit of incorporating is reducing
your liability. Except in very particular cases,
the directors of a limited company are not
liable for that company’s debts, whereas
sole traders are. That said, you might have
to give personal guarantees when accepting
a business finance as a company director,
which erodes this benefit, but generally, you’ll
be more protected. Another benefit is that it
can often be more tax efficient, although you
would need specific tax advice on your own
circumstances to determine this.
In terms of timing, in normal times, we
encourage clients to explore incorporation to
limit their liability. We can help with this for a
fixed price, so please get in touch. However,
these are not normal times. If you are
struggling financially, it may be tricky and you
should seek advice from your accountant or
insolvency practitioner as there are specific
rules surrounding moving assets out of
creditors’ reach. Furthermore, creditors who
have security over your personal assets are
unlikely to release this security unless the
company can offer something to them of
similar value and that needs to be factored in
or else the exercise is less helpful.
If you would like further information, please
contact our corporate team on 01254 828300
or corporate@backhouses.co.uk.
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