Its also important to realize when to take the suggestions that is freely available as there are numerous documented instances of company directors being found liable for wrongful trading, and as a result having to repay thousands of pounds to the company's liquidator.
By seeking advice early its possible to avoid any personal implications of the company insolvency and also use the assets of the company to pay for the costs of closing it down.
This year in the United Kingdom many thousands of businesses will have to close down due to a down turn in trade due to the recession. Most of these businesses will use the actual CVL procedure also known as the Creditors Voluntary Liquidation.
The CVL is where the directors from the business invite a expertly qualified insolvency practitioner to come in and advise all of them or they could just get a pre pack insolvency. He will often conclude that this business is insolvent and needs to cease to trade so it does not really run up further cutbacks. He produces what is called a statement of affairs which sets out the financial position of the business.
The Insolvency specialist invites the creditors of the business to a meeting in which he will be asking them to vote to close the business as it cannot pay its financial obligations. The statement of affairs will be sent to them so they can see that its insolvent.
Most creditors even though they respond will merely fax in their proxy forms saying yes to the company being wound up and their evidence of debt forms to prove their debts.
The company will be proclaimed insolvent and the Insolvency practitioner appointed to wind up its affairs. He then collects in any financial obligations, sells any resources and after discharging his fees pays any money left over as a dividend to the creditors.
In reality there is usually no dividend as the resources realised simply cover the costs of the process.
The resources of the insolvent business are also often bought by the outgoing directors, who begin again. This is known as a pre-pack sale.
It is vitally important to take early and effective suggestions if you think your company might be insolvent.
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