Going into insolvency can significantly impact many areas of your life. We’re here to support you as a director. In this blog, we’re looking into the insolvency domino and how to minimise damage.
It might not come as a surprise that insolvency does tend to have a domino effect. This is because it will begin impacting you, then your suppliers will miss out, the government will miss out and so on.
In some cases, not only will staff end up losing their jobs, but they may also have to deal without having their wages on time.
Unfortunately, these effects don’t start and end with your business. Instead, they affect you as the director and even your family too.
Here are just some of the ways that you can minimise the damage of the insolvency domino.
Be transparent
It’s very important to liaise with your shareholders, employees and suppliers. Staff can end up being quite negatively affected by insolvency. You should try to let them know as soon as you can so that they can make other arrangements.
Ensure that you speak to your creditors. You need to keep them in the loop about what’s going on and when you might be able to pay them. If you don’t let them know the truth, they will keep ringing, and you may end up facing bailiff action. On top of the stress you are already facing, this will not be good.
Being open and honest will help you maintain the trust and respect that you have with your suppliers and other people involved.
Engage with an insolvency professional
The sooner you engage with an insolvency professional, the better the outcome will be for you. There are many great insolvency professionals out there, but you need to make sure that you do your due diligence.
We have a dedicated team of insolvency professionals who will be open and honest with you about your circumstances. We’ll be transparent about any potential issues you may run into as a director.
If you’ve never been through this process before, you might be feeling rather worried. An insolvency professional can guide you through the process. As soon as you notice that you are struggling to pay your business debts, you need to seek insolvency advice.
Prioritise your staff welfare
It’s highly likely that it’s not your staff’s fault that you’re in this situation. They’re actually probably the backbone of your company. When dealing with insolvency, you need to provide your staff with regular updates on the situation. Letting them know in advance gives them a chance to make their own plans.
Make sure that staff know what they can claim for
There will likely be a number of payments that your staff can claim, and you can help them out by letting them know. Some of these may include redundancy, notice periods, holiday pay and unpaid wages.
Engage with suppliers
Your suppliers have been important to your business, so you need to make sure that you continue to engage with them. You have to think about your future and the future of your business. Communicating can lead to further respect. Suppliers will appreciate being informed throughout the process.
When things start becoming difficult, perhaps you could suggest that you make partial payments to them. You’ll most likely find that the supplier would rather have something rather than nothing. By opening the dialogue, they’re likely to be more flexible with you. If you communicate effectively, they will likely hold off on using other methods to get the money they are owed from you.
Look after your own well-being
As a director of a company that is becoming insolvent, it can become very stressful. When you’re searching for information, you often find that it’s very conflicted and no one can give you the right details.
If you’re struggling with how to deal with all of this, seek counselling support. Alternatively, we are always here to chat. There will be no judgement and no obligations; we just want to help.
It’s so important that you speak to people and get some advice. It can be useful to speak to other business owners when you are dealing with insolvency.
Ensure that you are clear on what your personal liabilities are if you go into insolvency. You must understand this in full with no sugarcoating. Think about things like personal guarantees, overdrawn loan accounts and more. Find out more about director’s loan accounts here.
We really hope that you’ve found this useful. We’re always here to offer honest, expert advice regarding your business.
I'm Chris Worden, Managing Director at Director First. With over 7 years of experience, I help UK directors navigate the complex world of UK corporate insolvency. We offer free and independent advice to UK directors and advise them about what options may be available to them if their limited company starts to struggle.
I am passionate about helping other directors overcome their business challenges and get back on their feet, as I was once in the same position as them. I had a business that became insolvent, and the advice out there was confusing and overwhelming. I am here to provide honest and valuable advice to UK directors.
I am proud to say that we are one of the only 5-star corporate insolvency companies on Trustpilot with hundreds of 5-star reviews, and we publish videos weekly on our YouTube channel. Our channel is designed to educate UK directors about insolvency and debt advice.