Insolvency in a business can happen for many reasons – a downturn in the economy, poor management or fraud being just some of them. Some of the signs that financial difficulties are lurking in your business are poor cash flow, ongoing losses and creditors still being unpaid outside of normal trading terms. If you even suspect your business is losing ground financially it is imperative to act quickly in order to save it.
To do this, Lawyers Perth advise that the first thing that should be done is to consult with competent commercial lawyers to make sure your company is indeed, heading towards financial disaster. It is wise to take business advice from business experts and implement it as quickly as possible in order to save your business. This advice could be anything from cost cutting measures through to restructuring the business, all depending on the state of the finances and type of business structure already in place.
But what happens if this is not enough and your business becomes insolvent?
- Do not allow the company to incur any more debt.
- Do not continue to trade.
- Check out your options for restructuring, refinancing or getting more equity.
- If these are not advisable, you will need to appoint an administrator or liquidator.
An administrator will work in the company to see if it can be saved in any way. If it can, well and good. If it cannot be saved, an administrator’s job is to see that the creditors get a better deal that they would if the company went straight into liquidation.