In today's tough economy, many businesses are considering filing for bankruptcy. This article will shed light on the business bankruptcy process and how it affects companies in the marketplace. If you are curious about the causes of bankruptcy, how a company can resolve its insolvency, or the best way to determine if bankruptcy is right for your business, then you need to read this article.
A business bankruptcy occurs when a company is unable to pay its debts either because it does not have enough cash in the bank, or because it is overwhelmed with debt and its liabilities are greater than its assets. Technically, businesses don't go "bankrupt" from a terminology standpoint. They either enter, a Company Voluntary Arrangement known as a "CVA" or the company's assets are liquidated.
When a company enters into a Company Voluntary Arrangement (CVA), it normally is because it is running out of cash and has opted to enter into receivership. When a company enters into receivership, creditors have the right to appoint a receiver to organize the company's assets and ensure that the creditors' interests are being met.
There are cases when the business can not be saved or reorganized. If a company in financial distress can not pay its financial commitments and is not purchased by another company, this company is considered insolvent. Upon determining that a company is insolvent, an insolvency representative will take control over the business and its operations. It is the insolvency representative's responsibility to sell all of the company's possessions and allocate all of the proceeds to the debts of the business.
In a liquidation proceeding, the creditors are paid back in relation to their seniority. Liquidators often have the first priority of the recovered funds in order to pay their fees. After the liquidators have been paid, tax authorities will be next in receiving a payment. Secured debt holders such as banks, will be the next creditor on the list to be paid. Any remaining assets will be divided among unsecured creditors, including lenders, bondholders, vendors, and employees. Unfortunately, shareholders rarely recover their investment into the company.
Any business that is considering a business bankruptcy should seek the advice of a competent insolvency practitioner. And experience practitioner will be able to guide you in your business through the procedure of filing a business bankruptcy. Although a Company Voluntary Arrangement or liquidation might be the best option for your business, it is important to see competent advice to ensure that you are making the right decision for you and your business.
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Article: An Overview Of The Business Bankruptcy Process In The UK Author: Mark Walters Publication Date: 2010-11-01 Total Views: 240 Word Count: 429 Category:Home /
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