Corporate Insolvency

It can be a frightening and unsettling time when your company is unable to pay its debts and insolvency beckons. And while the thought of insolvency is distressing, there’s no need for the actual process to be.

Choosing the right partner to help you through this difficult time is crucial. Corporate Guardian is skilled in all areas of corporate insolvency and can work with you to make this time as stress-free as possible.

Are you trading whilst insolvent?

The first thing you need to do is work out if you are trading while insolvent. There are two tests to determine this, which we can help you with.

The cash-flow test:
This shows if you can pay your debts when they fall due.

The balance sheet test:
This involves us determining your company’s assets, less your liabilities including any future liabilities.

 

So what is corporate insolvency?

In a nutshell, corporate insolvency occurs when your company is unable to pay its debts when they fall due. Putting off seeking professional advice is not advisable if you’re facing this situation. Rest assured the earlier you approach us for advice, the better the outcome is likely to be for your company and its creditors and the sooner you can start getting on with your life.

The two most common procedures when this occurs are liquidation and administration.

Frequently Asked Questions

What is Creditors Voluntary Liquidation?

A creditors voluntary liquidation (CVL) occurs when the company’s members determine that the company can no longer satisfy its debts and is insolvent, or likely to become insolvent. It allows for an orderly realisation of the company’s assets, investigations into the company’s failure and distribution of the company’s assets amongst creditors.

Why choose a Creditors Voluntary Liquidation?

The CVL process allows for a systematic approach to winding up a company and bringing its affairs to an end. The Liquidator acts as an independent third party to ensure that the process is conducted appropriately and accordingly to the relevant law.

What is Voluntary Administration?

Voluntary administration is an insolvency procedure where the directors of a financially troubled company with a security interest over most of the company’s assets appoint an external administrator.

The voluntary administration process ensures that the business, property and affairs of the company are administered in a way that:

  • Maximises the chances of a business to continue to exist, or:
  • Results in a better return for the company’s creditors and members, than from an immediate winding up of the company (section 435A).

The administration process takes place over an interim period, usually lasting between 25 and 30 business days.

Why choose a Voluntary Administration?

A voluntary administration provides a flexible procedure, enabling a company time to compromise an arrangement with its creditors, which may save the company, the business and jobs while maximising the return to creditors. It can:

  • Provide a company with breathing space to deal with creditors in an orderly manner and prepare proposal to give the best return to stakeholders
  • Allows an independent party to review the company’s affairs and deal with the pressures of creditors
  • Reduce the possibility of secured creditor proceedings against the assets of the company
  • It may allow the company to stay out of liquidation

If the voluntary administration attempt fails, the legislation facilitates the winding-up of the company.

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