Business Insolvency - Knowing When To Liquidate   by Flavien Keily

in Finance / Accounting    (submitted 2010-03-10)

This article started its life as "The Credit Crunch Survival Guide" and then I got thinking what if a company has tried all the tactics and find that business still won't come to them, that creditors are getting more aggressive, the bank will not extend any more credit and today they have received a letter from the Sheriff. If they are lucky enough to have some assets to convert to cash and plough back into their business then they may be able to struggle on for another few weeks. But is that just throwing good money after bad? When is it time for you to step in? When is it time to advise your clients to let go?
I get it. This was their baby, their fledgling business they cared for, grew, thought about all the time and worked bloody hard in. So yes the returns were good during the Celtic Tiger years, but today, the here and now is a different matter altogether. So what do you advise? Well, everyone is entitled to a second chance and your clients haven't done anything wrong, well not yet anyway, but they could actually be breaking the law and risking their limited liability status as they procrastinate.
As you know a company is insolvent if it cannot pay its debts as they fall due? What this means is that if for example they are not paying their creditors within terms (usually 30 days), not making revenue returns and payments by 19th of each month then they are technically insolvent and your responsibility is to tell them, they must immediately take steps to seek the correct advice about the options open to your company to resolve its difficulties. If you continue to ignore the signs your clients may lose the protection of "limited liability" by inadvertently preferring certain creditors or ordering goods when they have no realistic prospect of paying for them.
Liquidation-is it an option? Most of the time your clients don't really have a choice. If they are insolvent then the directors have to place the company in voluntary liquidation. Advising a company to go in to liquidation can be a thankless task, but it is often the best if not the only advice you can give.

- Irish Liquidations