Insolvency practitioner for corporate business

Corporate insolvency may be determined in one of two ways. A business is considered insolvent if one: it cannot pay creditors when debts become due, or two: if its total liabilities outweigh its assets. If a company fits the first scenario, it is deemed cash-flow insolvent. If it fits the second or will at any time in the future, it is balance-sheet insolvent. An insolvent corporation will face one of several outcomes, depending on the specific circumstances surrounding the case. Often, insolvency practitioners will get involved.

Liquidation is the process by which an insolvent business’s assets are sold to satisfy its creditors. Directors may instigate liquidation or creditors may call on the court for a mandatory liquidation of the company. In most cases creditors agree on a corporate insolvency practitioner whose job it is to convert the insolvent business’s assets into their cash value. The insolvency practitioner then distributes the liquefied assets to creditors in their respective order of priority.

A protective procedure against creditor action may be invoked when the possibility of a company turnaround is a better option for creditors than liquidation. In this case, an insolvent company or a company facing insolvency may be placed under Administration. This procedure allows creditors to place a qualified insolvency practitioner in control of the company. He or she may restructure the company, sell it, or trade in it. This option allows the insolvent corporation to continue to function to serve the interest of its creditors.

Directors of companies facing possible corporate insolvency must proceed with caution to avoid being held personally liable. The safest way to proceed when corporate insolvency seems inevitable is to procure professional advice as soon as possible. Directors should be knowledgeable of the financial state of their company at all times and be aware of their responsibilities to avoid possible risk.

Unwise actions may lead to serious consequences. For example, continuing to trade in a company when insolvency is unavoidable may hold serious consequences. Directors who do so put themselves at serious risk of legal action and personal liability. This includes obtaining contracts which the company does not intend to complete, retaining new creditors, and the undervalued selling of assets, among other questionable actions. It is important for directors to give priority to the needs of creditors and seek professional guidance at the onset of possible corporate insolvency.

An insolvency practitioner serves a dual purpose. First, he or she can be obtained by an insolvent company to provide legal advice and professional assistance. Procedures must be taken to avoid negative repercussions when a company becomes insolvent. Insolvency practitioners can help protect the interests of directors and allow for the smoothest possible transition into whatever form the corporate insolvency takes.

The second and main job of the insolvency practitioner is to see to the demands and juggle the collective interests of the creditors of the insolvent company. Insolvency may follow a variety of directions, including administration and liquidation. The job of the insolvency practitioner is to successfully balance the needs of the various creditors and bring the corporate insolvency to a conjointly beneficial conclusion.