Is Your Company Insolvent?

Establishing if your business is insolvent requires a review of the company accounts to determine whether creditors can be paid as and when they fall due.

A business may trade in an insolvent state for some time but eventually this will lead to a formal insolvency process when breaking point is reached.

The areas of focus in determining if a business is insolvent

  • Cash flow
  • The company balance sheet
  • Legal actions pending or instigated
  • Ability to meet tax and other liabilities

Company directors are required to present accounts reflecting a true and fair picture of the company finances. If the company balance sheet is in a negative position this can be an indication of impending insolvency.

Recognising when this occurs and seeking professional advice is vital to ensure the directors of the company are acting within their fiduciary duties.

Failure to do so could lead to directors being personally liable for company debts or disqualification.

If the company is being pursued by creditors and does not have the financial capacity to settle, this can be an indication of insolvency.

An insolvency advisor can assists business owners in determining the true financial status of the business and take the appropriate steps.

Paying HMRC is imperative in order to sustain the survival of the business. If it is unable to do so, this can also be an indication of insolvency. If not dealt with in a timely fashion this can lead to fines and proceedings to wind up the business.