Corporate Insolvency Test
The Corporate Insolvency Test
If your business has cash flow problems, the first priority for a director is to clarify its current financial position. Understanding if the business is solvent, heading towards insolvency or already insolvent is vital. Trading whilst knowingly insolvent is a serious matter and could lead to a director being personally liable or worse disqualified from acting as a director.
A company is considered to be insolvent under UK law if it is unable to pay its debts as they fall due or if liabilities exceed assets.
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Taking credit immediately whilst the situation is being considered
Taking monies out of the company by way of dividends
Taking any assets of the company
Paying anybody unless you KNOW you can pay everyone
Selling any assets of the company
If your company has cash flow problems you should take immediate, professional, independent advice from a Licensed Insolvency Practitioner, like turpin barker armstrong. Not doing so could result in penalties for wrongful trading if you continue to trade whilst knowing that you are insolvent.
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