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Corporate Insolvency

A Company is considered to be insolvent under English law if it is unable to pay its debts.

There are two tests for Corporate Insolvency:

the cash-flow test: is the company currently, or will it in the future, be unable to pay its debts as and when they fall due?

the balance sheet test: is the value of the company's assets less than the amount of its liabilities, taking into account as-yet uncertain and future liabilities?

If the answer to either of these questions is yes on balance of probabilities, then the company is deemed insolvent under English law. Furthermore a company is deemed unable to pay its debts, and therefore insolvent, if:
a creditor who is owed more than £750 has served a formal demand for an undisputed sum at the company's registered office and the debt has not been paid for three weeks; or
a judgement or other court order has not yet been satisfied.

There can be consequences of a Company Insolvency

Depending on the facts of a given case, the following consequences of Corporate Insolvency may apply:

  • increased risk of personal claims and directors' disqualification
  • heightened risk of formal insolvency procedure
  • a winding-up petition
  • any disposal of assets will be void
  • default under banking facilities
  • withdrawal of support from suppliers and customers.
  • transactions can be reviewed and reversed
  • To reduce the risk of Corporate Insolvency and the directors potential for personal liablities being claimed against you, contact Absolute Recovery Limited now.



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