Insolvency occurs when a company or entity cannot pay a debt payment with the current cash flow and cannot pay the debt when payments are due. This is an extremely difficult path, but in many cases it is necessary. This means that you cannot reach the necessary assets to cover your financial needs or those of your business. You have to take into account many different factors. As a result, each case is personalized. The article explains on how should a company in the UK find the best solution to insolvency?
Insolvency is often confused with bankruptcy. Although they are not identical and should not be confused, these two concepts are not different from each other. Insolvency can result from many factors, resulting in expenses higher than income. This is an assessment of your financial situation, while bankruptcy has passed the court decision. This is a declaration of serious financial difficulties as a way to look for debts and fiscal obligations.
In addition, bankruptcy proceedings may arise as a result of an action against an organization or a non-insurer. As mentioned above, this is not a legal procedure, so it is important to understand that you do not have to make a contribution. Bankruptcy is generally reserved for individuals and not for companies in the United Kingdom. British bankruptcy law is based on several principles. The advice in case of insolvency for the most demanding companies is a relatively new form of advice for all types of companies and people with serious problems.
Insolvency does not always mean that the company must stop, close and end. It all depends on whether the continuation of the trade will allow the company to get out of insolvency and continue to improve its position in relation to creditors. Insolvency specialists not only have a thorough knowledge of bankruptcy law but also include accounting, tax law, corporate law/ labour law and litigation. These consultants use all these skills to provide advice in a complex world of company liquidation services. You can apply two criteria to your company to determine if the law treats your company or business as insolvent. They are:
– Balance test: observe the activities of your company and determine if they are larger or smaller than the number of commitments. If your actions are smaller than your obligations, the law would consider your company insolvent. Remember to take into account all future responsibilities of your company.
– Cash flow test: can your company pay future debts or debts on the date of payment? If the answer is “yes”, your company is insolvent.
If one or both of these tests are successful, your company is likely to become insolvent. Hiring an insolvency lawyer and an insolvency professional is essential to guarantee your business solution, asset allocation, asset recovery and much more. Losing a company for insolvency is never easy, but it is much more difficult if you try to go alone in this way and it can cost much more than your company.