Published: 06/12/2018 By Philippa DrewittIf your Company is facing financial difficulties, it is important to consider whether it is insolvent. If a director allows their company to trade whilst it is insolvent, they can become personally liable for company debts if the position of the Company’s creditors worsens.
There are two tests which a director can apply in order to determine whether the Company may be insolvent:
1. Cash Flow Test:
Can the Company pay its bills and liabilities as and when they fall due? If not, the Company may be insolvent.
2. Balance Sheet Test:
Do the Company’s liabilities exceed the value of its assets? If so, then the Company is likely to be insolvent.
If you consider your Company may be insolvent, even if you consider the problems you are facing to be temporary, we would recommend seeking help and advice without delay.
We offer free initial advice so contact us today on 020 8661 7878 in order to discuss your circumstances and consider the options available to your business.