Business insolvency may be avoided through professional advice – particularly if your company is a ‘zombie business’.
This is the term used to describe companies that are currently able to service their debts, but are not capable of paying more than the minimum required to cover the accumulated interest.
Any change in circumstances, interruption to income or other negative market impact could be enough to push these companies over the edge and into business insolvency.
Lee Manning, president of R3 – the Association of Business Recovery Professionals, says: “We would urge these businesses to seek professional advice in order to lift them out of the ‘zombie zone’, which would enable them to withstand unfavourable changes in circumstances and, eventually, take advantage of growth when it happens.”
He adds that recent figures from the Insolvency Service show fewer company insolvencies but a rise in CVAs – company voluntary arrangements.
As such, Mr Manning suggests that the types of company insolvencies (and their alternatives) being pursued may be becoming more flexible, as creditors “take a hit” in order to allow a company to survive, rather than “go under entirely”.