Today’s query involves legal action taken against the company. What if the company has insufficient funds or I don’t want to spend money to fight it? What are other options for restructuring or closure?

There are several components to this question. Firstly, there’s the conflict of the legal demand. It’s firmly suggested to hire a lawyer specialized in this field.

Eventually, lawyers generally give their customers cost evaluations. Afterwards, the administrators may decide that it’s not monetarily, or in terms of time and exertion, beneficial to engage with the dispute, or it may be profitable up to a specific point. If it has not been settled for a practical business bargain, then looking at restructuring and different choices for the company would be sensible.

One of the things that these administrators might also want to consider is the amount of money or the magnitude of the claim that could make the company potentially insolvent.

This should be taken into account since one of the directors’ obligations for any company director is not to trade their company while it is insolvent.

In terms of restructuring options, these can be broadly summarised as follows: the company could enter external administration and present a deed of company arrangement proposal which would provide different creditors with different settlement sums or offer amounts to settle their debts. If the disputed creditor is the largest, majority or only creditor, they may not be satisfied with this if negotiations have already failed.

However, if the disputed creditor is a smaller percentage of the overall company’s creditors, this could be an option as other creditors may accept the proposed amounts.

All creditor claim amounts must be supported by evidence. If a viable arrangement cannot be agreed upon, the company may need to consider liquidation if unable to pay its employees, lawyers or debts.