Insolvency is a bad place to be in, it is a very stressful situation to be in, business owners or individuals who take loans from banks and couldn’t pay back on time is called insolvent, insolvency can be defined as a level whereby one or a company cannot pay back the funds borrowed on time, unable to pay back money borrowed from a firm result to shareholding loss, property forfeiture and other loses. Forms of insolvency include:
- Balance sheet insolvency:
This takes place when a company’s liabilities are much greater than the assets it has, this can be known by doing a balance sheet test with a cash flow test, it helps to avoid an insolvency situation. this provides a picture of a company financial level.
- Cash flow insolvency:
This whereby a company or an individual has the assets to cover the loans borrowed, but the assets cannot be sold quickly for money, because the assets have low liquid.
Types of insolvency solution:
(IVA) Individual Voluntary Arrangement
(CVA) Company Voluntary Arrangement
Creditors Voluntary Liquidation
Different things cause insolvency in the world today, Poor economic can cause it, war in a country can cause it, poor business planning can cause it, poor management skills can cause it, poor products sales can cause it, it can be caused by loss of credit, loss of the business capital, loss of the revenue, unplanned expenses, health issues.
Insolvency Consultations bring a response from UK government They help strengthen the framework insolvency in the cases of corporate failures, Insolvency Consultations bring a response from UK government and seeks transparency in some aspects of the corporate stewardship, they do this to check if they are working.
They help strengthen the framework insolvency in the cases of corporate failures, they do this by taking measures to Guarantee good accountability of heads of companies when selling out shares in a bad state, they create steps to support and rescue businesses. They legislate to give liquidation services the needed powers to carry out investigations of the directors of companies that have been dissolved if they are suspected of breaching their obligations boundaries.
During this yes the UK government received a total number of 93 responses to consultations from a number of stakeholders like special advisers, trade representative groups, business representative groups, retail investors, academic institutions, the firm who manage pension funds, professional association, trade unions, and others. When taking a loan do a thorough planning and execute, may your health be blessed so that you will not fall into insolvency.