In today’s fast-paced business environment, even the most robust enterprises can encounter financial difficulties. Whether due to economic downturns, unexpected disruptions, or internal mismanagement, financial distress can be a daunting reality for many companies.

However, insolvency does not have to be the end of the road. With the right business rescue options, you can navigate these troubled waters and potentially emerge stronger than before.

Here’s a guide to the key business rescue options available in 2024:

1. Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is a formal agreement between a company and its creditors to pay off debts over a fixed period. In a CVA, the company remains in control of its operations, and with the approval of creditors (at least 75% by value), it can restructure its debt in a way that is manageable.

“A CVA can be an effective tool for businesses that are fundamentally sound but are facing temporary cash flow problems,” says Tom Fox, Head of Insolvency at Umbrella.UK Insolvency. “It allows businesses to continue trading while dealing with their debts, providing the breathing space needed to get back on track.”

2. Administration

Administration is a formal insolvency process where control of the company is handed over to an appointed administrator, whose primary aim is to rescue the business as a going concern. If rescue is not possible, the administrator will work to achieve a better return for creditors than would be achieved through liquidation.

“Administration offers legal protection from creditors’ actions, giving businesses the time and space needed to restructure and potentially turn things around,” says Tom Fox. “It’s an invaluable option for those facing immediate financial pressures but still holding on to a viable business model.”

3. Pre-Pack Administration

A variant of administration, Pre-Pack Administration involves pre-arranging the sale of the company’s assets before it enters administration. Once the company is in administration, the assets are quickly sold to a buyer, often a new company set up by the original directors.

This process can maximise the value of the business’s assets, as the sale is pre-arranged and executed swiftly, often preserving the business and saving jobs. However, Pre-Pack Administration can be controversial, especially when the business is sold to its previous owners. Transparency and communication with creditors are crucial to avoid potential conflicts.

4. Liquidation

If rescuing the business is not a feasible option, liquidation might be the only way forward. There are two main types of liquidation: voluntary and compulsory.

• Creditors’ Voluntary Liquidation (CVL) – Initiated by the directors when the company is insolvent, allowing them to choose a liquidator to manage the process.
• Compulsory Liquidation – Forced by a court order, usually following a petition from creditors.

“Liquidation, while often seen as a last resort, can provide a necessary conclusion for companies that are no longer viable,” explains Tom Fox. “It allows directors to address their obligations to creditors and move forward, whether that means starting a new venture or pursuing different opportunities.”

Business Rescue Options – Conclusion

Navigating financial distress requires careful consideration and expert guidance. Whether through restructuring, administration, or liquidation, there are several business rescue options available in 2024. Each option comes with its own set of advantages and challenges, and the right choice depends on the unique circumstances of your company.

If your business is struggling, don’t wait to seek professional advice. As Tom Fox from Umbrella.UK Insolvency advises, “The sooner you act, the more options you’ll have available. With the right strategy, you can steer your business through difficult times and towards a more secure future.”

For a free initial consultation about your business rescue options, visit www.umbrella.UK today and get the expert help you need to explore your options.