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Is my Company Insolvent?
There are 3 simple tests under the Insolvency Act to determine if your business is insolvent:
1. The Balance Sheet test – are your assets (items you own, money owed to you and cash in the bank) less than your liabilities (this is money owed now together with prospective and contingent liabilities)?
Yes - then it is likely you are insolvent and you must take advice early to put yourself and your business in the best possible position.
No – that’s good news, but try the next test.
2. The cashflow test – Are you unable to pay your debts as they fall due? For example, do you pay PAYE/NIC deducted later than the 19th of the following month or VAT more than 30 days from the quarter end?
Yes – You must seek advice. You have an obligation to understand this issue and getting it wrong could be very costly.
No – it’s unlikely you are insolvent as most people will have failed either the first or second test, but try the next one just to be sure.
3. Has a creditor obtained a CCJ or issued a statutory demand that remains unpaid after 21 days?
Yes – We would urge you to seek advice now by either reviewing our website or by contacting us where we will work with you to solve your financial worries.
No – It seems all is well, but monitor the position closely as once a business is insolvent you must act in a way to maximise the interests of your creditors.
If you have answered yes to any of the above questions, do not panic, just because your business is currently insolvent it does not mean you cannot work your way out of it. You might be able to reduce costs, raise finance (link to refinancing), reach a time to pay agreement with HMRC, utilise a formal rescue tool such as a Company Voluntary Arrangement (CVA) or Administration to buy you time and breathing space to concentrate on moving forward.
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BCR offer insolvency services throughout Staffordshire, Shropshire, Cheshire and Lancashire with insolvency practitioners helping individuals and companies in Stoke on Trent, Shrewsbury, Telford, Bolton, Preston, Blackburn, Stockport and Manchester.