Sink or Swim?

Discussion in 'Insolvency' started by triedandtested, Mar 7, 2018.

  1. triedandtested

    triedandtested UKBF Newcomer Free Member

    16 0
    Hi All,

    My wife and I are directors of a limited company that's coming up to 4 years old. We are just at the point of the company making enough money to pay its way (just), but poor decisions on my behalf over the past 12 months have resulted in around £28,000 of debt in the companies name.

    This is split between 8 creditors with the biggest debt being £12,000 and the smallest being £600.

    £7,000 of the debt (4 of the creditors) is already under repayment agreements which we can realistically manage but I'm constantly worrying about the remainder of the debt.

    We have been thinking for some time about changing the company name (we are currently trading under Company LTD t/a XYZ so everyone knows us as the trading name rather than the ltd company name anyway), and with all the worry/pressure from creditors, I have considered throwing the towel in as Company LTD and starting afresh as XYZ LTD, but that doesn't really sit right with me and I'd much rather sort the issue and register a change of name with Companies House instead.

    I'm just wondering whether anyone can offer moral support really. Do we have a hope of turning this around or do we admit defeat and throw the towel in?

    Are we likely to be able to get agreements that we can realistically manage on a £12,000 debt? (It is a big UK household name, so we're not talking a local supplier as such).

    Thanks in advance
     
    Posted: Mar 7, 2018 By: triedandtested Member since: Mar 7, 2018
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    13,710 2,945
    Have you sat down and done some sums to work out what the company needs to turn over to generate the money to clear the debt?
     
    Posted: Mar 7, 2018 By: Scalloway Member since: Jun 6, 2010
    #2
  3. triedandtested

    triedandtested UKBF Newcomer Free Member

    16 0
    We would need to turn over approx £80k to clear the £28,000 in full which is around a 18 months turnover at the moment.
     
    Posted: Mar 7, 2018 By: triedandtested Member since: Mar 7, 2018
    #3
  4. Mr D

    Mr D UKBF Legend Free Member

    9,091 921
    If the supplier will agree to a repayment plan then they may get more than if they wind you up. And its potentially cheaper for them.

    Question to ask yourself (and keep asking yourself as you go on) is whether the business is insolvent or not.

    If the business does become insolvent then all bets are off. You then have to take actions to cease trading or risk problems including personal liability.

    We had a couple of debts bigger than £12k we were paying off, one at £198 a month and one at £641 a month (a CCJ).
    And eventually became insolvent. Repayments can be agreed but not necessarily kept to later if other problems develop.
     
    Posted: Mar 7, 2018 By: Mr D Member since: Feb 12, 2017
    #4
  5. triedandtested

    triedandtested UKBF Newcomer Free Member

    16 0
    Thanks for that - it's good to know that some creditors can be reasonable.

    I don't foresee any issues down the line as long as we can get these debts under control, but there's no guarantees in business eh?
     
    Posted: Mar 7, 2018 By: triedandtested Member since: Mar 7, 2018
    #5
  6. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    2,135 266
    The change of name will make no difference to your position as the Company will still owe its debt.

    You could start a Newco but a) will still need to deal with the Oldco and b) Newco will have to pay for any assets it wants from the Oldco and c) you will need to take care of b) as the Oldco is insolvent.

    You are at risk of claims potentially being brought against you from any subsequent liquidator so need to take care.

    You should take insolvency advice from a licensed IP.

    It may be that you can put a formal CVA proposal to creditors or consider Liquidation and starting again.
     
    Posted: Mar 8, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #6
  7. triedandtested

    triedandtested UKBF Newcomer Free Member

    16 0
    Hi Lisa,
    Thanks for your post. Sorry, I wasn't saying (or suggesting) that changing the company name would change anything. I was saying we have a choice between dealing with the debt and registering a change of name (my preferred option) or close Oldco and start Newco (my least preferred option as I don't want to walk away from my responsibilities).

    So are you saying that if we continue trading now, we are doing so illegally due to the debt we have compared to assets?

    Thanks
     
    Posted: Mar 8, 2018 By: triedandtested Member since: Mar 7, 2018
    #7
  8. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    2,135 266
    Hi

    I'm afraid I still don't understand what difference changing the Company's name will make.

    It sounds as if the Company is insolvent on the basis it cannot pay is debts as and when they fall due and on a balance sheet basis.

    Yes you are potentially wrongfully trading at present and at risk of committing other offences under the Insolvency Act 1986, for example illegal preferences in paying certain creditors.

    If you transfer any assets from Oldco to a Newco you are risk of committing a transaction at an undervalue and/or other offences under IA86.

    If the Company enters an insolvency procedure, for example Liquidation, the Liquidator will investigate the Directors conduct and the transactions to see if any claims can be brought against the Directors personally for breaches under IA86.
     
    Posted: Mar 8, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #8