When your business first begins to have financial difficulties, you should take action quickly to increase its stability. You have options such as refinancing and consolidating, or you can look to insolvency or liquidation proceedings.
- Assess the Financial Situation
First, assess your business's true financial situation. You may need to review the bookkeeping or talk to an accountant about your profits, losses, and debts. Be realistic about how much you can improve the finances and in how long of a time period. If you are already having trouble paying the bills, then you need to act fast.
- Figure Out Your Options
After you have a sense of how bad the financial difficulties are, it is time to figure out your options. Some businesses choose to consolidate or refinance. They may have multiple locations that can close, they may need to let employees go, or they may need to temporarily stop taking new orders. Any way of cutting costs that can decrease debt and increase short-term cash flow could help. If the business has loans or a mortgage, the bank may agree to refinance them.
- Last Resorts for Businesses in Trouble
If consolidation or refinancing will not help much, then you may need to pursue insolvency or even liquidation. In The Bahamas, insolvency proceedings are voluntary, court-supervised, or compulsory. Solvent businesses can conduct voluntary insolvency with court supervision. Businesses that are not solvent may be compelled to court by creditors or other stakeholders.
During the insolvency process, a liquidator will distribute company assets to creditors. Rarely, some companies survive insolvency, while others are completely liquidated during the process. Liquidation and insolvency should be last resorts for businesses that cannot pay debts or cover costs.
If your business is truly in trouble, you may want to seek legal advice about your obligations. Before you have to undergo liquidation, you should understand your rights, as well as which actions you should avoid. Also, you may need to explore how to protect your personal assets from business creditors depending on the business structure you have used. Talk to a lawyer as soon as possible.
To find out more about business insolvency and liquidation, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.
The hiring of an attorney is an important decision that should not be based solely upon the information contained in this website. This website is designed for general information purposes only and the information provided should not be construed to be formal legal advice nor the formation of an attorney/client relationship.
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