There are several ways to look at the topic of insolvency. You can learn about the subject in general terms, which will certainly help you understand how the process works and how you can best make it work in your specific situation. But it’s essential for you to know how insolvency works where you live on a national basis, in your specific region or state, and in your community.
It’s also important to understand the difference between business insolvency and personal insolvency. The process can be quite complex, which isn’t surprising when you consider that it’s a legal action. You’d be wise to get in touch with someone who has the experience to guide you through and deliver the results that you need. You can save time and stress when you work with professionals, simply because much of the work can be completed with documents that have been used in other situations. In addition, you can save money because the process takes less time and labour from start to finish.
Different Insolvency Types
Some companies will select voluntary liquidation when they realise that the organisation is insolvent. This allows for a more orderly conclusion to business affairs using a rather simple process. Company shareholders can appoint liquidators in writing after meeting with professionals who help identify the specific issues involved and the steps that need to be taken. If you’re at the point of insolvency in New Zealand, this can be the most efficient and least stressful method.
There is another alternative: court-appointed liquidation. But admitting insolvency and directing the process voluntarily generally produces a better outcome, primarily because it ties up the process more quickly. Court-appointed liquidation can involve long delays and higher costs for expert assistance. When shareholders haven’t appointed a liquidator, a creditor can decide who will act as the liquidator.
If you are involved in a court-appointed liquidation, it will be very important to have experienced professionals working with you. Their experience might lead you to a recovery process that directors and shareholders wouldn’t know about. These specialists also have access to law firms that can wind up the process efficiently and quickly.
When Is a Business Insolvent?
As mentioned, the term “insolvent” can be applied to businesses and individuals. The rules are generally the same as an individual bankruptcy but you should never assume that you know exactly where you stand. It’s always best to consult with someone who is experienced in helping companies move through the process from initially admitting insolvency to tying up the last detail.
At some point, you or your specialist may use a cash flow test to help determine if the organisation is insolvent. The basic question is: can current and future debts be paid as they fall due? It may also be possible to use a balance sheet test to determine the value of company assets and then subtract the liabilities to get a better picture of business status. If either or both of these seem to point in a certain direction, it may be time to work more closely with professionals who can finalise your status as a company.Share This Article: