The first step in solving any problem is recognizing there is one
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The legal stuff – the definition of insolvency in The Insolvency Act 1986 is, the ‘inability to pay debts’ it is found in section 123(1) and is mainly concerned with the objective evidence of insolvency required for a court to make a winding-up order. For the purpose of determining whether your company is solvent or not the term applies. That is ‘An ability to pay debts when they fall due’.
A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities’ (Section 123(2)(e))
Less used, but nevertheless a good indication is, to what extent is the company using the shareholders’ fund as working capital?
That’s the legal stuff
But you don’t really need this to tell you what you already know, do you? As deep down you know the real stuff - the real life everyday stuff that you’ve been living through?
You don’t have any cash; you can’t pay yourself; you can’t pay the tax and vat, you’re having difficulty paying staff, there are suppliers ringing you up all the time and CCJs are pending.
The bank account is never out of the red and they won’t extend the overdraft. Even worse, you’re using personal credit cards to pay company expenses with no hope of getting it back.
You don’t seem to have time to work and earn money because you’re too busy fire-fighting.
You wake up every night wondering whether you’ll lose your home, your family, and what the hell you’re going to do about it.
So what do I need to do?….. (read on)