VOLUNTARY INSOLVENCY – VOLUNTARY LIQUIDATION
Voluntary Insolvency – Why?
Considering Voluntary Insolvency! Why? Being a director with a company in financial difficulty – stressful. You may feel you have lost control though you still are responsible for its care.
Once you have, therefore, realised your company has no chance to recover and the only option remains to close. However, you hold the key as to the timing of the closure, the process of closing, remembering not to trade while insolvent.
The choice of voluntary insolvency, therefore, affords you more direction. It allows you to ensure you protect your companies creditors from incurring any additional losses and then reduces the potential investigation you, as a director, will receive, during the insolvency process.
VOLUNTARY INSOLVENCY – WHAT IS IT?
The Voluntary Insolvency term is the process to describe surrendering and, concluding your company is no longer viable financially.
Subject to criteria to be reviewed by you and an insolvency practitioner. If you wish to close the company, then you would choose a process known as Voluntary liquidation.
As we are discussing insolvency, the usual option for closure is a creditors voluntary liquidation.
When assessing the financial viability of a company, we adopt two tests for solvency:
- A cash-flow test. – Your company cannot pay it’s creditors as and when they fall due.
- A balance sheet test. – When your company has more debt than it owns.
If one or both reflect your company, then it is safe to say your company is probably insolvent. At this point, as a director, you are by law, compelled to protect the financial interest of your companies creditors and not those of the shareholder.
Now time to seek the help of an experienced Licensed Insolvency Practitioner and review all option to protect you and all your companies creditors.
If upon review, your company turns out to be viable and possibly saved. Further options exist by way of a rescue process.
WHAT IS VOLUNTARY LIQUIDATION?
Voluntary Liquidation. An insolvency process whereby the company or person decides to cease trading as they are unable to pay debts and therefore require help.
So they VOLUNTARY request to LIQUIDATE their position before having it forced on them by a creditor.
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