The Consequences to Insolvency

insolventInsolvency is a topic that should never be taken lightly. It is pretty major and can lead to the demise of one’s beloved company and in some cases even put one personally liable to creditors. But apart from the obvious, what other consequences does this bomb have? Better read on to find out.

There lies a possibility for a WUP. – A WUP which stands for a winding up petition is a severe method by which creditors force an insolvent company to liquidate. The court shall come into the picture and will impose a compulsory liquidation if the grounds presented by creditors are proven true.

Credit score shall be tarnished. – When the insolvency eventually leads to a bankruptcy or winding up procedure, expect credit standing to be stained. Nothing gets unrecorded and this can mean many things the most hefty of which would have to be finding it hard to apply for future credit or loans.

Assets may need to be sold. – Prior to a liquidation procedure, the entity may already be forced to sell some of its assets to cover for the payment of liabilities. The first to go are often the big ticket items like machinery and equipment as well as inventories.

Employee benefits will be cut. – When financial dilemmas arise, one of the first costs to go will be that pertaining to employee benefits. Of course, this is bad news for both employer and employees.

Personal claims are possible. – If any personal guarantees have been given, owners and directors are liable to pay up to the extent of their personal assets.

Director penalties are to be had. – The insolvency practitioner shall examine each and every director’s conduct to see if any negligence or dishonesty has occurred. If any, the director shall be held personally accountable as well and may even face legal consequences.

Brand will be marred. – Insolvency does not leave one unscathed. It can leave a scar on the business and its brands to the point that customers, investors, business partners and suppliers will withdraw their support.

Insolvency is not yet the end although it sure is close to it. Experts therefore suggests that companies must act really fast and smart in order to stop sinking deeper. It may take a lot of effort to rise back up and keep from drowning but believe us when we say this; with the right methods insolvency can be solved. Many have and so can you.

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How Smart Entrepreneurs Act When Faced with Winding Up Petitions

winding-up-petitionWhen faced with winding up petitions, what does an entrepreneur have to do? Today we’ll talk about this very important topic so be sure to read on and take notes.

Winding up petitions (WUP) are a process that involves the dissolution of a corporation. Primarily brought upon by disgruntled creditors, it is submitted to court where an order shall be released if the evidence and claims prove to be valid thus forcing the company in question to liquidate and cease operations.

This affects insolvent companies that no longer have the ability to fulfill their obligations to creditors and whose total liabilities exceed its total assets. In the course of a company’s lifetime, a WUP is considered to be one of the most fatal scenarios that could befall any institution as it forces it to liquidate whether it wants to or not, strips of director control and even involves investigation. It’s definitely a bomb, if we would have it.

Handling winding up petitions is a very serious matter and smart entrepreneurs know this very well. There are a couple of things that they ensure to make the process as less painful as it already is. In some scenarios, they even get to flip the situation and avoid it altogether.

#1: They act really fast.

In this situation, the court shall release the decision seven days after the petition, a time where entrepreneurs can take action. It’s relatively short but if efficiently utilized shall be enough.

#2: They hire an expert.

Even directors and officers are not experts at liquidation procedures. After all, that’s not what running a business is about. This is why hiring a qualified insolvency and liquidation practitioner must be done. From them, advice and best courses of action can be taken.

#3: They talk to creditors.

One of the reasons why creditors go with a winding up petition is because payment of the value owed from them has been repeatedly delayed and denied. Their last option to recover such value is the WUP. Within the seven days, the company can still come up with an agreement which could make the creditors withdraw the petition.

#4: They assess the values.

Smart entrepreneurs will scrutinize every detail. Is the amount brought up by the creditors at court valid? If it isn’t then, it is crucial to bring this up.

When faced with winding up petitions, smart entrepreneurs should know what to do. In fact, they should already have a game plan for such a threat.

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