A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Company Debt Options Explained
If your company is struggling with debt, there is no single solution - the right option depends on whether the business is viable, the level of creditor pressure, and your goals. Here's a clear overview of the main options.
Option 1: Informal Negotiation
The simplest approach - negotiating directly with creditors:
- Time to Pay with HMRC
- Payment plans with suppliers
- Extended terms with landlords or lenders
Fast and flexible, but not legally binding. Best when the problem is temporary and creditors are willing.
Option 2: Refinancing
Restructuring existing debt or raising new funding - for example, a new loan, asset refinance, or invoice finance. This can ease cash flow but increases overall debt, so it only suits a genuinely viable business.
Option 3: Company Voluntary Arrangement (CVA)
A formal, legally binding agreement to repay a portion of debts over 3 to 5 years while continuing to trade. If 75% of voting creditors agree, all unsecured creditors are bound. Suits a viable business burdened by historic debts.
Option 4: Company Administration
A rescue procedure that places a legal moratorium on creditor action, giving time to rescue, restructure, or sell the business. Suits a viable business under acute creditor pressure - such as a winding-up petition.
Option 5: Creditors' Voluntary Liquidation (CVL)
An orderly closure for a company that cannot pay its debts. Directors initiate the process, choose the liquidator, and act responsibly. Suits a business that is not viable.
How to Choose
The decision turns on two questions:
- Is the business viable? - if yes, consider CVA, administration, or refinancing; if no, a CVL
- How acute is the creditor pressure? - if acute (winding-up petition), administration may be needed for protection
Speak to a Licensed IP
The right option depends on your circumstances. Our Manchester-based practitioners will assess your situation honestly and advise on the best route - free and confidential.