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What Does a Business Insolvency Company Do?

A business insolvency company is a firm that deals with insolvent companies. Typically, they are appointed by creditors to handle the liquidation of a failing business. The process is similar to that of a winding-up petition and the insolvency company is responsible for making payments to creditors based on what they can realise from the sale of assets and stock. The process can begin voluntarily (via a CVA) or involuntarily (via a CVL).

A company may become insolvent when its liabilities exceed its assets. This can be due to cash flow problems or increased expenses. However, the insolvency of a company does not necessarily mean that it will fail – in fact, it can still be saved if directors act quickly and seek professional advice.

There are several indicators that a company is close to insolvency and some of these are very obvious. These include persistent creditor contact, a lack of cash on hand and a reliance on external finance. These are all very serious warning signs and should be taken seriously by any director who suspects that their company is close to insolvency.

In addition, the insolvency of a company can also occur due to unsustainable growth, poor cash management, or because the company’s products or services no longer match consumer needs and expectations. In such cases, the company’s profits decline over time leading to a downward spiral of financial difficulty.

Some companies are able to turn around their fortunes, but others may not be able to and will need to be wound up via an insolvency procedure such as a CVL or an MVL. The decision as to which route is best for a particular company will depend on its situation and the wishes of its directors.

An MVL can be used to recover trade debts, unsecured loans and overdrafts. It can be a quicker and cheaper process than a CVL and it allows the directors of a failing company to keep control of their business while aiming to rescue it. However, if it is not successful, the company will be put into compulsory liquidation by the courts.

Regardless of which route is chosen, the insolvency of a company will be recorded on the Insolvency Register, which is a public record of all insolvent companies. In addition, the directors of a failing company can be found guilty of misfeasance or breach of duty and could face financial recompense in addition to any losses incurred by the insolvent company. If you have any concerns about the financial health of your company, please speak to one of our experts. They will be able to help you decide which route is best for your company and its future.

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