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Is Your Company Insolvent?
Insolvency is a term used to describe a state of business operations in which a company is unable to meet its financial obligations and has debts and liabilities that exceed the combined value of all its assets.
However, the exact definition of insolvency, according to UK Law, is a bit more complicated.
Section 123 of the Insolvency Act 1986 states that a company is deemed insolvent if it cannot pay its debts as they fall due (the cash flow test) or if its liabilities exceed its assets (the balance sheet test).
If your company has had a hiccup (i.e. a customer or supplier going bust, the general economy, fraud, overtrading, litigation, withdrawal or reduction of finance) this may impair its short term viability. As a director you need to act quickly in order to survive and avoid formal insolvency proceedings such as CVA, Liquidation or Administration.
Download the free guide: Is your company insolvent?
A free PDF guide for directors and owners who think their business may be insolvent.Download