Workshop 10 - Corporate Insolvency

Question 1

When is a company unable to pay its debts?

Answer 1

Insolvency Act - s123
If:
1.a creditor owed more than 750 pounds has served written demand, waited 3 weeks and has not been paid or did not come to an arrangement with the company.
2. a creditor has received judgment and attempts to execute it but the debt is still unsatisfied.
3. it can be proved to the court that the company cannot pay its debt as they fall due - the cash flow test.
4. it can be proved to the court that the company has more liabilities than assets (balance sheet test).

Question 2

Insolvent company’s options

Answer 2

1. to take steps to put the company into liquidation.
2. to ask for creditors to wait for payment.
3. formal arrangement with the creditors (CVA).
4. Appoint an administrator.