Insolvency can occur when a company is unable to pay its debts as and when they fall due or when the value of a company’s assets is less than the amount of its liabilities. Essentially, when a company is no longer able to service its debts it is the responsibility of the directors to take appropriate action to make sure that the loss to creditors is minimised.
If a director allows a company to continue to incur further debts knowing that there is no reasonable prospect that the company can avoid insolvency, the director may be found to have traded wrongfully. This can lead to a director being held personally responsible for debts incurred during the period.
To avoid falling foul of this and other provisions of the Insolvency Act, directors are urged to seek advice from a Licensed Insolvency Practitioner at the earliest possible opportunity. Gore and Company understands the needs of directors and the pressures that they face. We therefore provide a free initial consultation that can put your mind at rest or assist you to develop a plan to address the company's problems.
When a company is insolvent there are a number of procedures available to deal with financial difficulties and whilst some have the aim of closing the company (such as liquidation) others have the objective of saving the business (administration and corporate voluntary arrangements).
- Company Voluntary Arrangement (CVA)
- Creditor’s Voluntary Liquidation (CVL)
- Members Voluntary Liquidation (MVL)
- Compulsory Liquidation
The Insolvency Practitioner will work with the directors to achieve the best outcome for all stakeholders according to the requirements of the Insolvency Act. Administration is a popular method of saving a company or for realising the maximum amount for its assets. Administration involves handing over control of the company to the Administrator. Alternatively a corporate voluntary arrangement allows the directors to maintain control whilst the Insolvency Practitioner works to develop a workable scheme to save the company