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The Advantages and Disadvantages

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Below is a summary of the Advantages and Disadvantages of each Business service offered. If you require further information or advice call our team who would be happy to assist with your queries.

1) Members Voluntary Liquidation – Winding up the affairs of a solvent company.
2) Company Voluntary Arrangement - Legal agreement to repay creditors over 5 years
3) Pre-Pack Administration - Re-structuring to protect the assets and employees of insolvent companies
4) Creditors Voluntary Liquidation - Winding up the affairs of an insolvent company
5) Compulsory Liquidation - Winding up of an insolvent company by the court on behalf of creditors
6) Receivership - Lenders taking control of a company to safeguard their security
7) Factoring - Improving cash flow for businesses using their debtor books.
8) Tax Solutions - Making a "time to pay" scheme with HMRC


1) Members Voluntary Liquidation – Winding up the affairs of a solvent company.

Advantages
  • This recovery service is the best choice for businesses that are not insolvent but need to be wound up.
  • It deals with all assets of a solvent company in an official, proper manner winding up the affairs in an orderly manner and ensuring all directors, HMRC etc receive their appropriate funds.
  • The whole procedure can take a few months depending on what assets there are for dispersal which allows business owners time to move on.
  • Directors remain in control throughout the procedure as they appoint the liquidator in the winding up, not the creditors and all creditors are paid in full and the surplus is paid back to the directors.
Disadvantages
  • This form of service is a statutory requirement; you don't have a choice but to choose an MVL if there is no-one to succeed or take the company forward and therefore the life of the company must come to an end.
  • The entire procedure is quite labour intensive. There are lots of statutory requirements to be met, assets to be sold, accounts to be closed and paperwork to be processed.
  • Ultimately with this service, everything needs to end up being in one single account so all assets have to be purchased to turn into cash.

2) Company Voluntary Arrangement - Legal agreement to repay creditors over 5 years

Advantages
  • If your business is in trouble because it owes money then this can be the perfect solution for your company. A CVA will allow a company to carry on trading and pay back to the creditors what it can afford.
  • For businesses that rely on having certain accreditations or property with mortgages attached it can be very useful in providing protection from the creditors whilst the company continues to trade through its' problems.
  • The money from assets and properties can be used to clear debts.
  • This solution can be great for businesses who experience downturns but feel with re-organisation the company will be able to succeed. A CVA will prevent creditors from winding up the company and give breathing space and a a turnaround opportunity for your company.
Disadvantages
  • With this service you are paying off historic debt as well as keeping up to date with current liabilities so you have to be absolutely sure of the viability of the business before embarking on a CVA. Having a realistic and accurate cash flow is essential
  • Some businesses prefer to set up a new company to go forward with for a fresh start.
  • For a CVA to be put into place, 75% of creditors have to agree to the proposal.
  • Businesses with in a CVA find that their credit rating is damaged and relationships with suppliers can be damaged.
    Failure to adhere to the CVA terms can result in the company being put into liquidation or administration.

3) Pre-Pack Administration - Re-structuring to protect the assets and employees of insolvent companies

Advantages
  • This is a very powerful restructuring solution by way of selling the assets of a struggling business on to a third party that allows uninterrupted continuity of the business.
  • Valuable members of staff can be transferred to the purchasing company , connections with suppliers can be saved ensuring future supply and customers can be kept.
  • The directors of the purchasing company have a greater degree of control throughout the procedure.
    For creditors, it gives a better return than liquidation.
  • Ultimately, this solution allows, the business to keep going allowing great continuity, the new company to flourish and jobs to be safeguarded
Disadvantages
  • This service can only be used for insolvent companies and those whose assets are valued at no less than £25,000 so it is inappropriate for small businesses with no assets.
  • Although members of staff can be transferrred; according to European law all employees of the old business who are transferred to the new company must be done so under the same terms and conditions of employment. Therefore, a pre pack administration cannot be implemented as a way of avoiding a redundancy programme.

4) Creditors Voluntary Liquidation - Winding up the affairs of an insolvent company

Advantages
  • This service is ideal for businesses that are insolvent and that cannot pay their invoices, creditors and have little hope of achieving a turnaround.
  • A CVL gives directors closure. It closes things down in an orderly professional manner and closes off loose ends, ending any headaches in a painless fashion. Directors also have the opportunity to choose the liquidator
  • From a creditors' point of view, they have the power to question the directors of the company so it can be rest assured all company debts and issues are dealt with accordingly.
  • Although it seems as though the business is in a mess, once everything is down on paper the situation becomes transparent and creditors will understand clearly the difficulties facing the company.
Disadvantages
  • Assets tend to be sold at forced sale values and so the return for the creditors can be low too.

5) Compulsory Liquidation - Winding up of an insolvent company by the court on behalf of creditors

Advantages
  • Compulsory liquidation is the most serious of actions taken against a company as it involves a dissatisfied customer or creditor winding up the company with a petition to recover debts or stop making its debts worse. Therefore, it is only the creditors who have reason to benefit from the service as they can force the business by court into liquidation.
  • As a director, you may have simply buried your head in the sand. Although this is a harsh outcome, it brings you back to reality.
Disadvantages
  • This service is anything but pleasant as it involves accounts to be frozen, books to be checked, a court order, trading stopped and all directors lose complete control of the business. However, this can be avoided if you act in good faith and quickly to seek a rescue solution.
  • Directors are investigated for the conduct and affairs of the company and such actions can result in personal liability or disqualification. Due to the fact that the directors did not deal with the affairs of the company effectively and allowed it to come to such a stage in itself, can be construed as an indication that they had poor control over the business.
  • Even though it is only the creditors who have reason to benefit due to an automatic ad valorum charge, after the sale of assets there is little opportunity for recovery of debt funds for creditors.
  • The process can take many months since it is dependent upon a court process.

6) Receivership - Lenders taking control of a company to safeguard their security

Advantages
  • There are little if few benefits from this solution from the directors point of view, as the running of the business and control of the assets are taken away from them and given to the receiver.
Disadvantages
  • This service is very harsh as the entirety of the business is taken over by the receiver. Some times there can be little warning.
  • There is no time for preparation and often it can be bad for other creditors as the receivers priority is to secure the position of the lender that has appointed them.
  • Everything that has a debenture or charge on it can be sold to get money back to the lender, often at forced sale values. Whilst the receivers will be looking for the best result for creditors,very often jobs are lost; trading ceases and any monies the director is owned by the company is gone too.
  • If the terms of the contract with the lender are breached they have security over the assets of the company and can administer and receive the assets.

7) Factoring - Improving cash flow for businesses using their debtor books.

Advantages
  • This service is fantastic for all businesses as a modern tool to improving cash flow and financial planning. It greatly increases your business cash flow without the need to employ extra staff, take on extra equipment or spend valuable time money chasing outstanding invoices.
  • Do what you do best which is run a successful company with the help of factoring- you get the money there and then as a quick boost so there is no waiting around for cash.
  • It is very resourceful for a business as there is no awkwardness of ringing round customers demanding payment; it isn't your problem anymore.
  • In many cases the customer doesn't even know you have implemented this service so they are none the wiser about your finances.
  • There are multiple companies that specialise in flexible factoring products so prices are competitive and it is a cost-effective solution of outsourcing debt chasing whilst freeing up your time to manage the business.
Disadvantages
  • There is a fee to set up but in reality it is often well worth it and the business will be better off doing this than chasing debts.
  • Debt queries or disputes can be referred on and ultimately impact the available funding. Poor debtors will restrict the financial backing.
  • Some customers may prefer to deal with you directly when it comes to financial actions between yourselves.
    A 'bad' factoring company reflects poorly on your business so how they deal with the customer affects the business image and reputation; therefore a reputable firm is essential.

8) Tax Solutions - Making a "time to pay" scheme with HMRC

Advantages
  • A tax solution service enables you to once again focus on running your business without the pressure from HM Revenue & Customs.
  • The process ensures that the business avoids formal insolvency and continues to trade- so you can thrive in the knowledge that your tax arrears are being dealt with by our expert team.
  • The service makes certain all taxes are dealt with properly and at a monthly rate that is affordable to you. Often, a business advice firm are listened to more so than a director and can state on the record where things are at and what can be offered.
  • VAT and PAYE must be paid on time or action can be taken by the HMRC and this service enables aggressive threats to be shunned and be replaced by an on-time payment plan.
  • Sometimes a little help goes a long way…so concentrate on your business and let us aid you in tax assistance.
Disadvantages
  • Renegotiating with the government during a credit crunch has its concerns. Some industry experts have argued that the agreements are masking more serious problems by giving firms option to breathe and space to deviate.
    Repayment schedules are risky as there is no certainty that the firm will ever be able to pay it back in due course, if it cannot now.
  • There are some legal dangers to the service. The biggest worry is that irresponsible firms that are freed of their tax obligations could not only put themselves at further risk, but also jeopardise their customers and suppliers.

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