Today it is even more common for businesses to find themselves facing economic hardship; everyone is feeling the pinch from the economic downturn. When a business can no longer sustain itself or their liabilities far outweigh their assets, the business is deemed to be insolvent. When it looks like a company is headed down this path an insolvency consultant may be asked to step in and guide the business to firmer ground, or to liquidation. These individuals specialise in insolvency, particularly the laws concerning it.
The first thing an insolvency consultant is going to do is look at the business as a whole to determine if restructuring is a possibility. They will check into management backgrounds, assess the assets and liabilities, test the market and then work to come up with a viable solution that is in the best interests of all concerned.
Once the initial assessments are complete, an insolvency consultant will then take you through which options are available to your company. There are several ways to deal with financial difficulties including bankruptcy, liquidation, restructuring and more. Which of these is best for your business will depend on many factors such as whether or not it is a temporary situation. If the market appears to be recovering and your company is not too stretched, you may be able to continue trading.
One common option insolvency consultants attempt to broker is a company voluntary arrangement. In this situation, all creditors are apprised of the situation and asked to accept a reduced debt settlement. Of course, the majority of creditors must approve such an agreement, 75% or more. Generally, debtors will receive about 45% of the total owed them and agree to write the rest off as bad debt. They further agree to seek no further legal recourse in regards to the debt.
As you can imagine the job of an insolvency consultant is not easy they go through rigorous training and testing before they can even attain their position and then must assess each insolvency case carefully. Many times they are also responsible for determining if a business owner has committed fraud, in other words continued to make orders and operate while knowing the business was about to go under.
If you must work with an insolvency consultant, remember they are simply doing their job. Answer any and all questions completely and honestly. You will only make matters worse by avoiding questions or glossing over the facts. That being said, it is a good idea not to volunteer any more information than they ask for, many people believe that by revealing anything and everything the consultant will be more friendly or helpful. This is just not the case, insolvency consultants or examiners have a job to complete and nothing more.