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About Insolvency

What Is Insolvency?

The state of being unable to pay the money owed, by a person or company, on time; those in this state are said to be insolvent.

There are two forms: cash-flow insolvency and balance-sheet insolvency. Engaging a specialised Insolvency Advisor to support you is critical, act now.

How Will You Deal With Insolvency?

Number one

Can I still trade my business?

If you can't pay a business debt when it falls due, then technically your business is insolvent. You should stop trading and seek professional advice from us immediately.
Number two

What happens if my company is insolvent?

If your company is deemed as insolvent, we’ll propose either an informal solution such as debt negotiation, or a formal one (Voluntary Administration or Liquidation) No matter the situation, we’ll know what to do.
Number three

How can I turn my situation around?

At Wisdom Business Consultants, we’ve got a strong team of pre-insolvency advisors and business professionals who understand that business is hard and not all situations are the same. Our advice is critical to ensure that whatever the situation we will know what to do. We’ll have a solution for you.

Corporate Insolvency

The three most common types of corporate insolvency are voluntary administration, liquidation and receivership.

star What is a voluntary administration?

Voluntary administration is where the directors of a financially troubled company or a secured creditor with a charge over most of the company’s assets appoint an external administrator called a ‘voluntary administrator’.

The role of the voluntary administrator is to investigate the company’s affairs, to report and recommend to creditors whether the company should enter into a deed of company arrangement, go into liquidation or be returned to the directors.

A voluntary administrator is usually appointed by a company’s directors, after they decide that the company is insolvent or likely to become insolvent.

star What is a liquidation or a winding up?

Liquidation is the orderly winding up of a company’s affairs. It involves selling the company’s assets and distributing the proceeds among creditors and distributing any surplus to shareholders. The three types of liquidation are:

  • court
  • creditors’ voluntary, and
  • members’ voluntary.

A creditors’ voluntary liquidation is a liquidation initiated by the company. A court liquidation starts as a result of a court order, made after an application to the court, usually by a creditor of the company.

star What is a receivership?

A company most commonly goes into receivership when a receiver is appointed by a secured creditor who holds security or a charge over some or all of the company’s assets. The receiver’s primary role is to collect and sell enough of the company’s charged assets to repay the debt owed to the secured creditor.

star What is a deed of company arrangement (DOCA)?

A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with, which may be agreed to as a result of the company entering voluntary administration. It aims to maximise the chances of the company continuing, or to provide a better return for creditors than an immediate winding up of the company.

Personal Insolvency

Personal insolvency is a legal term that describes your financial position. If you’re unable to pay debts when they’re due, you’re insolvent.

Arranging a debt agreement or declaring bankruptcy is an act of insolvency.

Bankruptcy

To declare yourself bankrupt is to declare to your creditors that you are no longer able to afford the repayments that you owe them.

Successfully filing for bankruptcy releases you from most of your debts.

Formal Debt Agreement

A legally binding arrangement, that lets you pay your creditors a sum you can afford.

A debt agreement is also referred to as a Part 9 or Part IX debt agreement. It falls under Bankruptcy Act 1966.

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