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Dealing with unpaid business obligations can get a little messy – it can be a challenge for a business owner to determine what steps to take to rectify a cash-flow problem or address complex financial issues with Canada Revenue Agency. Determining if a business should file for bankruptcy protection will involve an in-depth review of your business’ revenues, losses, assets and general ability to continue operations. A licensed Trustee in bankruptcy is the best professional to talk to if your business is experiencing financial trouble.

Running a business is a tough job – there are a lot of moving parts to manage and depending upon the complexity of your business activities, there can be unforeseen complications that you may not have considered. When a business experiences financial trouble it can be for many reasons – accounting errors resulting in tax re-assessments, uncollected receivable accounts, a general decline in business activity/revenue and lawsuits are all common reasons. It is no surprise that during the first and second quarter of 2015 there were 2,140 business filings (bankruptcy and proposal combined) across Canada.

A business bankruptcy is generally going to follow a similar step-by-step process to filing a personal bankruptcy with three general steps involved in starting the process:

• Consulting with a Trustee and assessing your business restructuring needs.
• Making a decision as to which option to pursue for resolving the debt issues – this could include a corporate proposal or a bankruptcy or a possible less formal solution.
• Meeting with a Trustee to sign documents and formally assign the business into bankruptcy or commence the proposal proceedings.

Once these three steps have been completed, the Trustee’s office will handle the activities that follow – including overseeing the sale of assets (if required), managing receivables and handling discussions with creditors and former employees who may or may not have unpaid wage claims.  As a business owner you will be asked to provide additional information to the Trustee such as books and records and your attendance at the fist meeting of creditors is required.

The Trustee may be able to avoid bankrupting your business depending on the circumstances, so the consultation phase is essential to determining the right course of action. It is important to know your business’ legal structure, as in some circumstances a business bankruptcy will may leave you subject to certain personal liabilities such as GST/HST liabilities, source deductions and business debts that may have been personally guaranteed.  A corporate director and/or shareholder may have personal debt implications in addition to the debt issues of the business so it is important to seek the advice of a Trustee.

If your business is experiencing cash-flow problems or having trouble with receivables management and bill payments we can help, please contact us today to review your options. Whether winding down a business and starting fresh, or rectifying your cash flow issues with a solid restructuring plan – our qualified Trustees can help identify your small business needs.