What is insolvency?

Insolvency means that a company no longer has the ability to pay its debts as they become due. There are two ways to define insolvency in a company, cash flow insolvency is, as above, the inability to pay debts as they become due, whilst balance sheet insolvency means that a company’s liabilities exceed its net assets.

Increasingly, companies are finding themselves in the situation whereby they are cash flow insolvent, but balance sheet solvent, however they run out of time to be able to release capital from their assets in order to meet their due debts. Conversely, a company may also be asset poor, showing negative asset values on balance sheets, but remain solvent due to their ability to consistently meet debts via revenue streams.

The best action that a company can take if insolvency is in any way under consideration, is to seek professional advice.
We have helped many companies over the years to manage their insolvency issues head on, and indeed, by doing so, many of those companies are trading successfully today. So, if you are considering insolvency in any form, do not hesitate to contact us and let us help you to choose the best course of action for your company.

Just hit the “Help My Business” button below to get help right away.