It is an unfortunate truth that, generally speaking, business owners only approach an Insolvency Practitioner about the financial plight of their company when the problem is terminal, and the only viable option is liquidation.
The approach often happens when the pressure on the directors of the company gets unbearable and it starts to effect their health. With a large number of New Zealand companies having directors and shareholders who have personally guaranteed the company’s debts to financial institutions and suppliers, the pressure that comes with running a struggling company is intensified by the fact their personal assets could also be at risk.
It isn’t unusual, when first meeting with directors and shareholders in this position, for them to tell us that they “can’t afford” to stop trading the business because they could lose their house. The reality is that by carrying on they are only digging the hole deeper and the light that they think they can see at the end of the tunnel is a train coming their way.
As soon as concerns arise around the solvency of a business, the best decision that can be made is to consult an experienced Accredited Insolvency Practitioner (AIP). If you do that soon enough, there are more options available to recover the position, without putting personal assets at risk, such as restructuring or compromises with creditors.
If, however, the damage has already been done, you may not be able to recover the position but, by contacting an AIP immediately, you can limit how deep the hole is and reduce the risk to your personal assets.
Regardless of the stage at which you contact the AIP and initiate a course of action, you will find that the pressure will ease. The AIP will take over dealing with the creditors who have been hounding you and will put in motion a process for the orderly winding up of your business.
Depending on your circumstances, there may still be issues for you to face over personal guarantees but, with insolvency process started, you will at least know the size of the problem and it won’t be getting any bigger.
If you would like advice in relation to the solvency of your company and the best way to deal with any issues, please contact one of the team at McDonald Vague.