In recent years, the United Kingdom has prioritized providing support to businesses facing financial difficulties. However, despite these efforts, sloppy language in media coverage has created a negative perception around insolvency, potentially discouraging businesses from seeking assistance.
Accuracy is paramount when discussing insolvency, and the law provides various procedures to support struggling companies. Liquidation involves selling assets to repay creditors, while administration aims to rescue businesses by appointing an administrator who assumes management. CVAs (Company Voluntary Arrangements) are voluntary agreements between companies and creditors, and standalone moratoriums offer a 20-day respite for directors to explore rescue options.
For companies not yet insolvent, schemes of arrangement and restructuring plans allow for debt restructuring or alteration of financial obligations. While the law aims to facilitate business rescue, the stigma surrounding insolvency, perpetuated by inaccurate media reporting, poses a challenge.
Negative terms like “collapse” associated with administration, which should instead be seen as a rescue mechanism, can deter businesses from seeking help. This inaccurate portrayal hinders the effectiveness of insolvency law, which aims to assist businesses in recovering and continuing operations.
In the current economic climate, it is imperative to promote accurate language and dispel the stigma around insolvency. Encouraging businesses to seek help early on increases the likelihood of successful rescue.
