Help me understand the insolvency process

There are two primary tests of insolvency. The cash flow test: are they able to pay their debts as they fall due? And the balance sheet test: are the assets worth less than the amount of debts? Once you know this the insolvency process can be split into two categories.

1. Rescue and recovery

Trying to save a business, by arranging to pay creditors over time, or by creditors agreeing to not being paid in full. Usually achieved through a voluntary arrangement or a sale of the business through administration.

2. Liquidation

   A close down of the company with a realisation of the company’s assets to pay as much as possible of the debts.

   For a detailed explanation of each of the insolvency processes click on the link below:

   • Voluntary arrangements  
   • Receivership
   • Administration
   • Voluntary liquidation
   • Compulsory liquidation