Company Insolvency
If a firm is currently in a state of insolvency, the directors have a legal obligation to stop trading. Therefore, if your firm is currently struggling under the weight of creditors, then you have to consider whether or not your business is actually insolvent. Key indicators that your firm may be insolvent include: The total amount of liabilities and debts owed to creditors is greater than the combined fair market value of the company assets (including book debt, bank funds, property and company equipment etc.) - this is also known as the Balance Sheet Test. One or more creditors have already taken legal action against your firm, including CCJs or Statutory payment demands. The business is unable to make regular payments to its operating debt as and when they fall due - this is also known as the Cash Flow Test.