Nicole Sharples, Director of Business Helpline Group, examines the challenges furniture businesses encounter when facing insolvency and the responsibilities of directors. A company becomes insolvent when it can no longer pay its debts as they fall due, or its liabilities exceed its assets.
© Dreamstime | Nicole Sharples (LinkedIn)
Directors have a legal duty to act in the best interests of creditors once insolvency is suspected. This may involve seeking advice from an insolvency expert to assess whether rescue options such as Administration, Company Voluntary Arrangements, or refinancing are viable, or whether liquidation is necessary.
If a Creditors Voluntary Liquidation (CVL) is pursued, a licensed insolvency practitioner manages asset sales, creditor communication, and company closure. Directors' conduct is reviewed, but personal liability is usually limited unless there has been wrongful or fraudulent trading, or personal guarantees have been signed.
Customer deposits and pre-orders become unsecured claims during liquidation, making transparency essential to minimise reputational damage. Acting early is critical, as delay reduces options for turnaround or restructuring. Sharples emphasises that understanding the process and seeking prompt advice can make the difference between rescuing the business or facing closure.
The next article in the series will explore managing creditor pressures in the furniture industry.
Source: www.bigfurnituregroup.com
