Insolvency can cause a company to lose its position in the market due to financial constraints. However, there are some things a company can do to combat that position and move toward becoming a healthy contributor and competitor in its relevant industry and market. So, this article discusses insolvency in UK law and how it is important for companies in such positions to seek legal help to potentially liquidate their assets to prevent themselves from shutting down entirely. With that said, let’s explore what implications insolvency can have on companies and their respective markets.
What Is insolvency in UK law?
What Is insolvency in UK law? Insolvency pertains to the financial situation of a business. Therefore, in the United Kingdom, insolvency is when a company is unable to pay its bills, and its liabilities exceed its overall assets on the company’s balance sheet. Therefore, insolvency is a legal position in which any of these two circumstances can prevent an insolvent company to struggle trading without increasing its own debt. What that means is that it may become financially impractical for the company to continue operating as a business.
The UK operates under the Insolvency Act 1986, and companies nearing or in insolvent positions must enter insolvency proceedings as per this law. In most cases, the business can look toward any of the outcomes mentioned below.
- Reach an agreement with financiers or creditors to increase the amount of investment
- Sign an agreement in which an insolvency practitioner can handle an insolvent company and put the organisation into administration
- Enter into a CVA, which is a Company Voluntary Agreement
- Shutting down the company (a step that businesses may not want to take but may become necessary when there’s no other option available to sustain the business)
Why You Should Hire Insolvency Solicitors
If your business is insolvent and you’re looking to hand over your business to an insolvency practitioner, you should hire insolvency solicitors. Making your company insolvent and working with a practitioner is a long and stressful process. There are various aspects to consider, and you also have to think about the future of your employees. Moreover, negotiations with financiers or creditors can take a long time, which can make it difficult for your business to manage operations throughout that period when funds are low.
UK insolvency solicitors can help you with this entire process. They can guide you on what options you have and how you can protect your company’s best interests throughout the entire insolvency procedure. Make sure that you work with lawyers who are trained in and experienced with insolvency in UK law. They will know the nuances of such procedures and can help make this entire process relatively less stressful than otherwise. In addition, they can also prevent other partners from potentially harming your business to protect themselves.
