How to Know When Creditor Compromise is the Right Step for Your Company in Nelson, NZ

When your company is looming on insolvency, one last ditch effort that can work to safe the business that you have built is creditor compromise. If you are working to do everything in your power to prevent your company from slipping into liquidation, a creditor compromise might be your lifeline. Principle Insolvency is here to talk about creditor compromises and how they work to save your company.

Understanding a Creditor Compromise

It is important for business owners to understand what a creditor compromise is in the first place. When you’re doing business, there are always going to be inherent risks as well as debt that the company takes on. It’s all part of doing business. When you can’t pay back those debts, that’s when the company gets into trouble. A creditor compromise is a more flexible solution to the problem than receivership or liquidation. This is a process that allows business owners to negotiate different payment terms to help make the payments more manageable. This debt restructuring can be the lifeline that your company needs.

Benefits of a Creditor Compromise for Both Business Owners & Creditors

When it comes to a creditor compromise, there are clear benefits for both the creditors and the business owners. Let’s take a closer look at the clear ways that both parties can benefit from this:
– Creditors: For creditors, the benefits come from the fact that even though they may not get completely compensated for the money that is owed them, they will surely get more money back than they would, should the company go into liquidation.
– Business Owners: Once the arrangements have been made in a creditor compromise, trading and rectification can continue to happen along the way. During a creditor compromise, there is no public announcement that is required, so the situation can stay more private as well. During this time, the directors will stay in control, inventory can continue to restock with supplier’s goods, and compliance requirements can continue to correct themselves.

Why a Company Would Choose Creditor Compromise

There are several reasons why a company is going to choose a creditor compromise over other options:
– Avoiding liquidation: There is a much greater chance of survival with a creditor compromise.
– Debt Restructuring: Debts seem more manageable with different payment plans and terms being set.
– Retain Control: Directors can maintain control over the company at this time.
– Less Reputational Damage: Since there is no public announcement, a creditor compromise doesn’t harm the reputation of the company.
– Legal Protection: At the time of a compromise and throughout the process, the company is protected against legal action by any creditors.

Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide

If your company is in trouble, you can turn to Principle Insolvency for the help that you need. We can assist you in the creditor compromise process and help you explore all the other options that are available to you. Call us today!