WINDING-UP WARNING: Southern and Thames Valley R3 chairman Garry Lee
R3 Southern and Thames Valley chair Garry Lee is warning the region’s directors to seek advice if their business is distressed, following a change to the winding-up petition threshold from 1st April.
Companies can now face a winding-up petition for debts of £750, after temporary legislation which had previously set the winding up petition threshold at £10,000 expires on March 31.
Garry is warning this could result in distressed businesses facing action from their creditors if they haven’t already come to an agreement about managing their debts:
“Now, more than ever, it’s critical company directors in the South and Thames Valley seek advice if they’re worried about their businesses or concerned about their ability to pay staff, landlords or suppliers.
“If they don’t, they could face the financial, operational and emotional effects and costs of contesting winding-up petitions in court over a debt of £750 or more.”
Garry, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, added: “Over the last two years we have seen a number of instances where creditors have recognised that engagement leads to better outcomes than enforcement.
“Many creditors appreciate the climate that businesses are operating in, and are willing to have a conversation about how and when they can be paid, but that needs to take place sooner rather than later.
“Company directors need to have the conversation about the financial situation they’re in, what they owe and who they owe it to with a qualified and regulated expert so they can develop a plan for settling their debts, before creditors resort to legal action to recoup what they are owed.”
Restrictions preventing commercial landlords from issuing winding-up petitions against limited companies for unpaid rent during the pandemic also expired on March 26.
Garry is urging businesses who are concerned about this to seek advice about their problems:
“Rent is typically one of a business’ largest expenses – especially in the retail and service sectors, and many directors may have found the amount they owe has increased if the pandemic has affected their ability to trade.
“It will be a while before the business environment returns to pre-pandemic levels, and companies in the South and Thames Valley will already have to face the prospect of increased fuel and energy costs affecting their bottom line and their cashflow, which will make balancing the books a lot harder without any kind of specialist help.
“If you’re worried about your business’ financial position, or you’re having problems paying suppliers, taxes or staff – which is a clear sign your business is financially distressed – seek advice from a qualified source, someone who can outline the potential options open to you for resolving the situation your business is in.
“We know how hard it is to talk about your concerns about your business but doing so typically leads to better outcomes if conversations take place sooner rather than later – this gives you both more potential options and time to take a decision than if you wait until the problem worsens.”
ENDS
