Company Director Stress 7

Voluntary Insolvency Process for Companies

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Voluntary Insolvency Process For Companies

Voluntary Insolvency – Why?

Considering Voluntary Insolvency! Why? Being a director with a company in financial difficulty – stressful. You may think you have lost control, though you still are responsible for its care.

Once you have therefore, realised your company has no chance to recover and the only option then remains to close. However, you hold the key as to the timing of the closure, the process of closing, remembering not to trade while insolvent.

The choice of voluntary insolvency, therefore, affords you more direction. It allows you to ensure you protect your company creditors from incurring any additional losses and then reduces the potential investigation you, as a director, will receive, during the insolvency process.

Voluntary Insolvency – WHAT IS IT?

The Voluntary Insolvency term is the process to describe surrendering and, concluding your company is no longer viable financially.
Subject to criteria to be reviewed by you and an insolvency practitioner. If you wish to close the company, then you would choose a process known as Voluntary liquidation.

As we are discussing insolvency, the usual option for closure is a creditors voluntary liquidation. For further reading, please view ‘What is a Creditors Voluntary Liquidation’.

When assessing the financial viability of a company, we adopt two tests for solvency:

  • A cash-flow test. – Your company cannot pay its creditors as and when they fall due.
  • A balance sheet test. – When your company has more debt than it owns.

If one or both reflect your company, then it is safe to say your company is probably insolvent. At this point, as a director, you are, by law, compelled to protect the financial interests of your company creditors and not those of the shareholder.

Now time to seek the help of an experienced Licensed Insolvency Practitioner and review all option to protect you and all your companies creditors. For further help on choosing a Licensed IP and their duties please view:

If upon review, your company turns out to be viable and possibly saved. Further, options exist by way of a rescue process.
They are:

What Types of Insolvency are available?

If your business remains  viable? Then consider  and could be saved by a company rescue procedure such as administration or a company voluntary arrangement (CVA).

Alternatively, it might be in the best interests of everyone involved if the company enters into a voluntary liquidation known as a creditors’ voluntary liquidation (CVL).

Advantages of Voluntary Insolvency

  • An IP appointed voluntary is perceived as less aggressive than a court appointed IP;
  • You appoint your choice of IP;
  • An IP appointed voluntary is perceived as less aggressive than a court appointed IP;
  • Avoids a court case therefore with company creditors;
  • You demonstrate to your creditors your action to protect their position rather than force them to act;
  • Fast process to then resolve pressure from creditors.

Disadvantages of Voluntary Insolvency

  • The company’s trading life ends along with all marketing and brands.
  • A voluntary liquidation is public and wrongful trading charges may be brought against the former directors if they delay taking action to protect company creditots.

Voluntary liquidation using Creditors Voluntary Liquidation is normally a preferred option by directors than aggressive creditors petitioning to wind their company up.

What Is a Voluntary Insolvency?

Voluntary Liquidation. An insolvency process whereby the company or person decides to cease trading as they are unable to pay debts and therefore require help.

So they VOLUNTARY request to LIQUIDATE their position before having it forced on them by a creditor.

What are the implications of insolvency?

The implication of voluntary insolvency depends upon the type of process used.

Choosing a rescue process, like a Company Voluntary Arrangement, allows a company the opportunity to trade back to viability.

Opting to liquidate ensures the company is removed from the registrar at the company house and ceased.

Presuming the former directors are not subject to any misconduct claims, then the directors remain able to be appointed to further companies.

Other Solutions to Insolvency

Direc tors are able to source other ways to resolve their company issues before considering formal insolvency. The company creditors may prefer this option as to a formal way. We may assist in your negotiations with creditors while keedspoing an eye on costs. Ask a member of our team on the number below for further assistance.

Rather than approaching a licensed insolvency Practitioner who acts for creditors, why not ask for less formal help if your company is viable?  HBG Advisory are able to act without formal insolvency instruction helping directors turn their company around avoiding closure.

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