startups

Everything You Need to Know About Business Insolvency

Everything You Need to Know About Business Insolvency

When you open a business, you will likely have never dreamed of the day that you might have to declare bankruptcy. It is an unfortunate fact of life that over 50% of small businesses do not survive for longer than five years. Understanding what business insolvency is and how it works will help you better comprehend possible financial pitfalls to avoid and how to deal with problems.

What is Business Insolvency?

The term insolvency applies when you are not able to pay your bills when they are due. Insolvency and bankruptcy are similar concepts, both relating to a situation where charges cannot be paid; however, the term bankruptcy is more commonly used in a personal context.

What to Do if You are Facing Insolvency?

If you are worried that your business might face insolvency, you are likely to feel stressed and anxious. The first thing that you will need to do is to consult an Insolvency specialist. With the help of an experienced professional, you can conduct an internal review. Once you have better understood your financial position, you will be in a better place to make more informed decisions about your business’s future.

Being worried about money is one of the most stressful things a person will have to deal with in their lifetime. If you are concerned about your business’s financial health, it is important that you do not try to deal with the problem alone. Talk about your worries and consult a professional for help.

What is Liquidation?

If your company is facing insolvency, then you might consider going into liquidation to pay off your remaining debts before you completely dissolve your company. Liquidation refers to the process by which a company’s assets are ‘liquidated’, meaning they are turned into cash. This cash can then be used to pay off a company’s debts.

Read More   Why Tesla Is Secretly Thrilled With Trump’s Controversial Budget - CCN.com

A company can go into liquidation without going into insolvency. For example, a business could choose to close and liquidate one store to pay off its debts while keeping the rest of its chain of stores open and operational.

What is Voluntary Administration?

If a business has been found to be insolvent, business owners might choose liquidation or voluntary administration. As the name suggests, the process of voluntary administration is a proactive one. This is because company directors will enlist the assistance of insolvency lawyers rather than just waiting for creditors to take further action. Insolvency lawyers will then conduct a thorough investigation and will either recommend insolvency or work to make an arrangement with the creditors.

What is Receivership?

Receivership is another response to business insolvency. In the case of receivership, the creditor will nominate the best form of action, usually depending upon particular details of the company. It is common for a creditor to either chooses to liquidate the business, or they might pick receivership. Receivership is when the creditor selects an individual to operate on their behalf in the business. The receiver’s main aim will be to repay the money owed to their creditor that they have been employed by.

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.