Insolvency expert urges Dorset and Hampshire businesses to make use of final furlough month

Mike Pavitt - R3 immediate past chairman for South and Thames Valley
Mike Pavitt - R3 immediate past chairman for South and Thames Valley

An insolvency expert is urging Dorset and Hampshire’s directors to make use of the final month of the Government’s furlough scheme to plan for the future.


Mike Pavitt, immediate past chair of insolvency and restructuring trade body R3’s Southern and Thames Valley region, including Dorset and Hampshire, is calling on the region’s company directors to use September to review their businesses and to seek advice about the options open to them to address any financial issues they may be facing.


Mike, who is head of corporate restructuring and insolvency at Hampshire solicitors Paris Smith LLP, said: “Directors have another 30 days where Government will effectively underwrite, where applicable, a large percentage of their wage bill.


“They will be expected to use this time to identify any ongoing financial issues their business may face after Government support is withdrawn, and to explore their options for resolving them.


“It’s naturally very hard to acknowledge if your business may be struggling but starting the conversation as early as possible will mean you have more potential solutions open to you, and more time to make a decision about how you move forward.”  


The most critical things company directors in Dorset and Hampshire need to be aware of are the recognised signs their business may be in distress and of the need not to ignore these signs if they present themselves, Mike said.


“Signs of distress that are common among businesses include very obvious triggers such as cashflow problems in terms of paying wages or suppliers on time and/or triggering contractual penalties or threats of creditor action.


“However there are of course any number of less common signs including problematic supply line disruption, the occurrence of regulatory breaches and protracted involvement in litigation.


“Even an inability to project net income sufficient to meet regular loan repayments, deferred rents and/or tax obligations may be a current sign of distress.


“Any firm in Dorset or Hampshire experiencing any of these could well be facing financial issues, and its directors will be at risk of personal liabilities in the event of a future insolvency or dispute if they fail to seek prompt advice from a qualified and regulated source about how to resolve the situation.


“Solutions to these kinds of problems can often be as simple as refinancing or consolidating the company’s debt, or shutting down part of the business so as to protect cash flow, but what’s really critical is that these options are explored before the issue spirals into something much more serious.”


R3 has developed a free guide for company directors, which explains in much more depth the common signs of business distress and the full range of restructuring and insolvency options that are available to businesses that are experiencing it.


Mike said: “We developed this guide to give company directors in Dorset and Hampshire all the information they need to identify the signs of business distress, and so they can understand the options that are open to address it.   


“The pandemic has disrupted trading for nearly a year and a half, and forced around 1.6m businesses to borrow more than £79bn from the government and, at the peak of the pandemic, furlough nearly nine million staff, so these are far from normal times.  


“We know there are a large number of directors who are worried about the future and unsure what to do if their business is struggling.


“We hope they’ll use this guide to gain a clearer understanding of whether their business is struggling, what they can do to turn it around if it is, and where they can get the help they need to do it.


“Following the pointers in the guide and taking bespoke advice from the right people at the right time will hopefully help to keep the vast majority of businesses healthy and profitable for the foreseeable future, whilst at the same time protecting directors from personal risks in a way which allows them to focus on that desired outcome.”


Latest figures from HM Treasury published at the end of July showed that 1.9million people remained on furlough.


The furlough scheme is due to end on September 30.
To download a copy of R3’s guide, visit www.backtobusinessuk.com

 

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