Liquidation Articles  #Shareholders

When a person or business entity's liabilities outweigh their assets, they are commonly described as being insolvent. However, legally, the test for insolvency is whether the debtor can pay its debts when they become due and payable. In the case of a company or close corporation, if there is no reasonable prospect of trading out of such circumstances, there may be a legal obligation to liquidate the business.

Signs that may indicate your company is in financial difficulty: On-going losses Poor cash flow Absence of a business plan Incomplete financial records or disorganised internal accounting procedures Lack of cash-flow forecasts and other budgets Increasing debt (liabilities greater than assets) Problems selling stock or collecting debts Unrecoverable loans to associated parties Creditors unpaid outside usual terms Solicitors’ letters, demands, summonses, judgements or warrants issued against your company