Every country has requirements for failing businesses to take steps to minimise the harm from their troubled business.
These will vary with every country and will have a number of options within the country.
Many of the legal obligations will centre around the question “is the business trading whilst insolvent“? Effectively, this means it might not be able to pay its debts to suppliers, staff and others, it might owe money to, as those debts fall due.
This is a serious issue.
If you are not sure and:
- It is your business: Consult an accountant and/or lawyer quickly. You should present them with the most up-to-date accounts you can and be able to explain the future outlook.
- You are middle management: Your bosses and the Board will largely be responsible for whatever actions the company takes. However, if you sense they are not aware of the issues, you should alert them to any problems you perceive.
In various countries there are ‘safe harbour‘ legislations that protect you while you trade your way out of trouble. If you are a small business using small accountants or lawyers, they may not be very familiar with these safety nets.
You might have to read more online and cast your nets a bit wider to find a professional who can help. It will no doubt cost more, but might help save your business.
At some point, if you are unable to turn the business around, it may be advisable to declare bankruptcy.
Going into, and managing, the bankruptcy process is a complex process. The process and steps will depend on your country. Because your personal assets may be caught up in this process, you are strongly advised to seek professional advice from a specialist. If you don’t know where to start, your tax accountant may be able to point you towards a suitable advisor.
Please note that you should not rely on the general information on business turnaround in this Course.
Always consult a specialist if your situation seems serious.
For more help understanding any issues relating to this Section of the Turnaround90 Campaign, use the 12Faces Diagnostic System to drill down to root causes of problems and find our suggested Treatments.