What is Property Insolvency?

At some point in time, businesses struggle financially. It could be sluggish market conditions, internal incompetency, oversight, negligence or more. Whatever the reason, business owners begin to feel the axe coming down on them.

The business becomes unable to pay its creditors. Gradually, liabilities out value the assets. Creditors gather in full force and start demanding settlements.

But unfortunately, the business cash flow has dried out or is not sufficient enough to settle debts.

In business terms, we call it the situation of insolvency. The business has become insolvent. Since a business is a property of a business owner, some also refer to it as the situation of property insolvency.

What are the Warning Signs that a Business is Heading Towards Property Insolvency?

• Non-compliancy with the payments of HM Revenue and Customs.
• Increased bad debts.
• Creditors sending in red-top letters.
• The directors or business owner financing the operations of the company from their personal funds.
• The directors not drawing their salary for months.

How to Rescue Your Business from the Situation of Insolvency

That is where, a licensed insolvency practitioner can help. An insolvency practitioner is an individual or a group of legal associates that would advise a business on how to leverage the existing assets of a business and use it to settle the accounts of creditors.

When trying to save your company, an insolvency practitioner would generally propose two options to a business owner. The option depends on the timing of the implementation of a recovery plan.

• If immediate intervention has been pursued, it’s likely that the business can recover from the situation without any serious implications. As such, the insolvency practitioner would propose the directors to enter into a company voluntary agreement or CVA. The recovery would be swift but may take a business months or even years to fully recover from insolvency.
• If an intervention is needed on emergency basis, failure to exercise of which can potentially halt a business’s operations, the feasible option would be to pursue administration.

What if the business has completely crumbled? How the directors then settle the debts?

In that situation, the insolvency practitioner would advise the directors to liquidate the business and distribute the assets fairly among creditors to settle outstanding accounts.

In summary, the sooner you seek professional advice, the higher your chances of successfully recovering from a situation of property insolvency.

Need Professional Help?

Is your company experiencing warning signs of insolvency? We can help. Our team of solicitors is well experienced in assisting clients with their property related insolvency cases and provide you with legal options that you can take to fulfil your interest and the interest of your creditors. Contact us to schedule an appointment.