What Does Business Insolvency Mean?

Business insolvency can be a difficult time for all involved. Your business is insolvent when it can’t pay its debts in the short or long term. If bills are being left unpaid and you don’t have enough assets on your balance sheet to cover them, it’s an indication that your business is in difficulty.

Of course, for some businesses, financial problems are part and parcel of operating. There are times when the cash flow is there and occasions when there is less liquidity. Insolvency occurs when you are no longer able to meet your obligations and have no prospect of doing so in the future.

As soon as you recognise there could be a serious financial issue on the horizon, it’s recommended you act fast and source advice from an insolvency expert.

There are a few options to consider if you find your business in this position:

  • The first is to contact creditors and hopefully come to an informal arrangement with them.
  • You can choose to do this more formally with a company voluntary arrangement.
  • The business could go into administration, where administrators run the company allowing it to continue or be sold and the creditors paid.
  • Finally, you can opt for liquidation and wind up the company, where the assets are sold and the creditors paid.

Many companies face up to insolvency only when creditors take legal action against them which can often end in an action for compulsory liquidation. This involves an official receiver or insolvency practitioner overseeing the process, selling assets to pay creditors and then closing the business and removing it from the register at Companies House.

If you are worried about insolvency or facing liquidation, it’s a good idea to talk to the experts.

Get some sound advice today from our friendly team. 

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