COMPANY & COMMERCIAL

Insolvency

All businesses need to be aware of the effect and implications of insolvency law, upon their customers, suppliers, competitor businesses or in connection with their own business.

Businesses - relations with insolvent third parties
Businesses should consider whether their terms of trade with any customer or supplier provides adequate protection in the event of insolvency. Quick and effective action needs to be taken by any business where any customer or supplier threatens to cease trading or otherwise becomes unable to pay its debts.

In the case of customers appearing to be in financial difficulties, prompt tactical action (taken with the benefit of legal advice) may minimise the loss incurred by the business in the event of the subsequent insolvency of the customer. This may include prompt action to recover unpaid debts or assets of the business held by the customer.

Opportunities may present themselves to acquire businesses or selected assets from liquidators and receivers - such an acquisition will usually have to be effected swiftly, to preserve the goodwill in the business and enable it to be acquired as a going concern.

Businesses - dealing with their own insolvency
Unhappily, many business concerns find themselves in financial difficulties for any number of reasons. The business should seek experienced practical advice as soon as it becomes aware of the problem. It may be possible for insolvency to be avoided. The considerable scope for corporate recovery may not always be appreciated when financial pressures are at their greatest.

If formal insolvency cannot be avoided, the choice of route to take will be important. In all circumstances, directors will need clear advice on the action to be taken to minimise the potential loss of the business to the creditors and to minimise any risk of personal liability.