Mantras to Get You Through an Insolvency

insolventInsolvency, according to AABRS, is described as a state that denotes the inability of an individual or organization to meet its obligations and liabilities as they mature. It is no doubt a very terrifying and alarming position to be in. Not only will it entail hard work and maybe even some luck but it will also require one to act fast otherwise creditors can step forward and enforce an iron hand or what we call a winding up petition.

Now we said that battling it is tough but nobody mentioned that it’s impossible. There are methods to turn the table around and rise out of insolvency. To help individuals and businesses do that, we’ve listed down some mantras to give everyone a little push and encouragement.

“It’s now or never.”

One of the crucial ways to survive insolvency is to act fast. Time is of the essence so individuals and organizations must see to it that no second or minute is wasted. Options must be weighed immediately and the circumstances of the case assessed to determine the best solution to be undertaken.

“This is not the end.”

Positivity or optimism may not solve the dilemma alone but it can do a lot to aid in its achievement. Many people tend to give up at the mention of a threat alone which should not be the case. The presence of risks does not necessarily denote demise. Besides, insolvency is not the final straw yet so never give up.

“Let’s sort things out.”

When one finds out about the financial dilemma, creditors must not be kept in the dark. Their calls and scheduled meetings should not be dodged as these would only raise red flags to them. Instead, talk it out and try to establish an agreement. Many creditors are willing to extend or revise the terms of the contract to make sure that they get paid in full or as best as possible. A winding up petition may put an insolvent entity to a close but it’s no guarantee that creditors shall be paid in full or even enough. They’ll listen.

“I need help.”

There is no ‘I’ in team especially when we’re talking about corporate insolvency, says AABRS. Owners must make sure that the right professionals are gathered to tackle on the problem. As a matter of fact, a qualified insolvency practitioner must be hired to facilitate and aid in the solution finding.

Pre-packed Administration 101

We’re pretty sure you’ve already heard about the Pre-packed Administration, haven’t you? This fairly new procedure for insolvent businesses has gained a wide following and acceptance for the past years. Why? Scroll through and read to discover.

Also known as a Pre-pack, this method enables a viable but insolvent entity to be sold in part or as a whole to directors, trade buyers or third party where it will continue to trade under a new name and management without the burden of its debts in cases where it is faced with serious financial stress and creditor threats. It is also important to take note that most arrangements involve a buy-back clause enabling the previous owners to regain ownership and control of the business. Once approved, the court protects the business from any actions taken by its creditors.

What makes it a very effective solution lies in the fact that it is a means to restructure the business where it gets rid of certain (but not all) debts, redundant employee positions, stagnant operations, unwanted or onerous contracts and more all while it supports and strengthens continuity and the entity’s going concern thereby upholding value by not catering to any interruptions in operations.

Of course laying off of workers may not be true for all. The keyword here is ‘redundant’ meaning these positions are no longer viable or are merely repetitive in nature. Still, even with the removal of the aforementioned redundancy a Pre-packed Administration is still better than liquidations or a winding up petition where everyone loses their jobs.

Remember that not all debts are written off. Secured debts are likely to stay. Personal guarantees and debentures will still remain intact too. Creditors would much favor such procedure as it enables a then struggling company to pick up where it fell down and get back on track. This gives them better returns in the future.

prepacked-administrationWill the public know about it? It depends. For most cases, people have no idea that a Pre-packed Administration is taking place. As mentioned earlier, this is because operations and trade are still going as is and as they used to. There is no amount of interruption or disruption taking place.

So would a Pre-packed Administration benefit a viable but insolvent business? It depends. You still have to consider other factors and it will be best to talk to an insolvency practitioner to help guide you in your decision.

Visit this page to learn more about administration,

How a Creditors Voluntary Liquidation Takes Place

One of the biggest if not the principal concern of any business entity is to stay afloat and keep themselves solvent, operating, profitable and growing. Unfortunately, there are cases when a Creditors Voluntary Liquidation becomes a visitor knocking on your door and it would be best to welcome it in rather than have it locked out only to be greeted by a bigger and meaner monster aka a Winding Up Petition later on.

Now, what procedures does a Creditors Voluntary Liquidatioinsolvencyn (CVL) call for? When is it valid and why opt for it?

First of all allow us to define a CVL. It pertains to a legal procedure where a company’s directors decide to willingly put the business to an end and cease operations by appointing a liquidator or a licensed insolvency practitioner to liquidate all of its assets and distribute such proceeds to stakeholders with priority to creditors.

There are numerous valid reasons as to why a CVL may be called for such as but are not limited to the following:

  • The company is debt heavy beyond repair and is therefore insolvent.
  • Continuous trade and operations is deemed impractical and unfeasible.
  • Demand for the company’s services or products have been withdrawn by the market.
  • Other restructuring or recovery options are not valid or doable.

Now let’s proceed to the steps or procedures involved.

Step 1 – Directors first contact an expert, preferably an insolvency practitioner for referral and advice. This stage is meant to carefully establish whether or not the business is suffering insolvency or if their predicament is a financial distress of other nature.

Step 2 – In this step, courses of action will have to be analyzed and determined so as to see whether other alternatives will work better for the company and its creditors. However, if the directors are intent on the cessation of business, the CVL is the best action to take.

Step 3 – A meeting with the creditors shall be held if directors and the insolvency professional have deemed the Creditors Voluntary Liquidation as their preferred track. This is to be held three to four weeks after the company has ceased trading and a liquidator has already been appointed, oftentimes the insolvency professional sought for in step number one.

Step 4 – A Statement of Affairs will have to be presented during the meeting with creditors. This document states the financial status of the entity and other relevant details to the liquidation.

Step 5 – Corporate assets are then liquidated by the appointed liquidator. The same will coordinate with creditors, collect outstanding debts, handle claims from employees, issue reports to government agencies, distribute proceeds to creditors and lastly to shareholders if any are left. This step ends the process of a Creditors Voluntary Liquidation.

If you want to learn more about voluntary liquidation visit