Common Insolvency Questions Answered
Insolvency opens up a string of questions whose answers only seem to get worse. But don’t worry. In this blog post, we’ll be walking you through some common insolvency questions – the ones everybody needs to know.
1. What is insolvency?
Insolvency is a financial state characterised by unmanageable debt. A company is insolvent when it cannot pay back its debt and can no longer make its usual payments. Although insolvency is often associated with bankruptcy, the two terms are not synonymous. Whilst insolvency is a broad term meaning a state of financial crisis, bankruptcy is a debt repayment option frequently turned to as a solution to insolvency.
2. How do I tell if my company is at risk of insolvency?
You’d think it’d be easy to tell if you’re at risk of insolvency, but the truth is it can be surprisingly difficult. Be on the lookout for problems with cash flow, paying the bills, and obtaining loans without sky-high interest rates. Picking up on these early warning signs could mean the difference between financial recovery and ruin. For more information, click here and read our previous blog post where we discuss this topic in-depth.
3. I am at risk - what do I do now?
If you suspect you are indeed at risk of insolvency, get advice from an expert. An insolvency professional will be able to begin work on a strategy to remedy your current situation. They will look at your financial records, credit scores and debt repayment options to get you back on your own two feet wherever possible.
4. Can my company recover from insolvency?
It’s not unheard of for companies to bounce back from insolvency. If your core business model is robust enough, there is always hope for recovery. However, the fact of the matter is that many companies don’t. Do all you can to prevent matters from getting any worse. Help and solutions can be found. Insolvency doesn’t have to mean the end of the road for you and your business.
5. My company won’t recover - what happens now?
What comes after insolvency is usually one of two things: liquidation or administration. Liquidation is the process of dismantling a company and selling its assets to creditors. Administration is different. Depending on whether or not it’s an option, administration doesn’t spell the end to a company in the same way liquidation does. It refers to a partial shutdown of a company so that it might recover and repay its debt in the future.
6. What will happen to my employees?
When a company goes into liquidation, all its employees will be made redundant. If they are eligible, they will claim statutory redundancy payments. This is the legal minimum. However, depending on their years of service and their work contract, they could be eligible for more.
7. What happens if the company owes me money?
When a company is liquidated, assets will be distributed to secured creditors first and only then will unsecured creditors like the business owner themselves receive payments where possible. You’ll be on a waiting list, essentially, and will receive money depending on how much can be given back to secured creditors.
Are you in need of insolvency support?
Insolvency has to be grappled with quickly if your business is to stand a chance of survival. If you believe your business is at risk of insolvency, get in touch. A limited free consultation with Silver Insolvency Solutions could be of enormous benefit to you.