Limited Companies - Are You Solvent?
Two Very Important Questions To Be Addressed
- Can the Company pay its accounts as and when they fall due? (Cash flow Test)
- Would liquidated assets be sufficient to pay liabilities in a liquidation? (Balance Sheet Test)
Should the answer be NO to either questions, this is the point at which a Company has established it is insolvent. To continue to obtain credit is “Wrongful Trading”. Directors need to be aware that They are jointly and severally responsible for the debts and are unable to claim protection under the Ltd liability status. Sections 213 & 214 Insolvency Act 1986. Wrongful and Fraudulent trading.
Before a Creditor can present a Winding Up or a Bankruptcy Petition, the outstanding debt must be at least £750.00. There is a judicial process that has to be followed and by obtaining an order from the Courts to stand down litigation in process, can give you the time to defend.
Directors that have Personal Guarantees pledged against Company overdrafts must look at their options when the Company’s future is not secure. This must be done before the bank exercises their right to litigate to obtain a Charging Order against a Directors property
What Options Are Available For A Stricken Company?
A Company Voluntary Arrangement
A “Statement of Affairs” is produced indicating “Assets & Liabilities” and “Income & Expenditure” This is circulated to all creditors who will have an opportunity to vote for or against the proposal. An affordable monthly amount is payable into an account on behalf of the Creditors and is supervised by one of our professional Insolvency Practitioners.
Unless a 100% dividend is on offer, the duration of the arrangement will be for 5 years. For an application to be successful, the overall amount to be received must be greater than would be available via a Liquidation. It is normal to offer a majority of the liabilities. (indicated on the Income & Expenditure forecast ). This can be achieved by the careful and considered negotiation required by your I.P.L partner.
The advantages of a Company Voluntary Arrangement are beneficial to all concerned. Creditors will receive more monies than they would in a liquidation. The Debtor is given the time to trade through the problem without the fear of litigation. The Directors continue to control their Company.
Your Not Alone: Company Insolvencies Facts & Figures
There were 5,055 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the second quarter of 2009 (on a seasonally adjusted basis). This was an increase of 2.9% on the previous quarter and an increase of 39.1% on the same period a year ago.
This was made up of 1,457 compulsory liquidations (which are down 6.8% on the previous quarter but up 8.7% on the corresponding quarter of the previous year), and 3,598 creditors voluntary liquidations (which are up 7.4% on the previous quarter and 56.8% on the corresponding quarter of the previous year).
In the twelve months ending Q2 2009, approximately 1 in 120 active companies (or 0.8%) went into liquidation, which is up slightly on the previous quarter when the figure was approximately 1 in 130.
Click to contact Simon Ashby at Inspired Performance or call 01590 675191
IN SUMMARY:
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The Book Of Survival:
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USEFUL LINKS & Numbers
www.insolvency.gov.uk
www.r3.org.uk
www.crisissurvivor.co.uk
Inspired Performance: 01590 675191