The failure to pay your debts when they are due is what insolvency is. Liquidation in the business world is when a company has to convert all its assets to pay off its liabilities. A company is in debt when its legal responsibilities exceed its possessions. Individuals who have no way of paying their debts may become bankrupt, it the interim companies may go into liquidation. In either of these cases an insolvency practitioner is to be appointed as a trustee in bankruptcy or liquidation so that assets for the creditors may be salvaged.
In order to prevent bankruptcy for the future of yourself and your kids, parents and schools may teach children the responsibilities of finances at a young age so that one day when they leave home the expenses of living will not come as a surprise to them.
Signs to look out for should you suspect your company are at risk of insolvency;
- losses that are ongoing
- a poor cash flow
- no business plan in place
- no completed financial records or unorganized accounting
- no cash-flow forecasts
- an increase in your debts
- problems with debt collecting
- no payment from creditors
- issue of demands against your company
- cash-on-delivery terms been placed on your company
- issue of post-dated checks
- special arrangements been put in to place with selected
- defaults on credit or interest costs
- financial problems
- the failure to raise funds from shareholders
- ongoing complaints or questions from suppliers
- hopes that the big next sale will save the company
If at a time you are aware that you are unable to pay your debts, considering writing to you creditors would be advisable, in this way a compromise may be reached. If you include a deadline as to when you would be able to pay off your debt, would count in your favor.
Written by Clark Amerson. Find the latest info on
liquidation or find out more information on
insolvency.
