Insolvency and Restructuring Solutions – Handy Tools for Self Diagnosis

Sometimes, well… nearly always, directors don’t like to talk about their company’s problems.  So we have developed two handy tools on our website where directors can do a bit of self diagnosis:

Tool 1 – Is my Company Insolvent? has nine tick-a-box questions on the topics of Cash Flow, Financial Statements and Creditor Relationships.  I strongly recommend any director, or adviser, pondering the solvency of a company use the list.  It’ll take about 1 minute and is done on a “best guess” basis.  The case law on this topic is huge, confusing and very much open to opinion.  So, believe it or not, I spent about a week distilling the contents of the many legal cases on the topic and in the end concluded it ain’t that hard – hence the tick-a-boxes.

Tool 2 – Ask IRA – So IRA is our geeky looking Interactive Restructuring Adviser.  We’ve got 4 simple tick-a-box questions and based on that we can give directors an idea of the Restructuring Solutions that are open to them.  Again, after distilling an awful lot of mumbo jumbo it became clear to us that the answers to those four simple questions dictate the options open to a director.  IRA will diagnose the financial position and provide a link to the suggested solution.

So does any of the above matter.  Yes it certainly does.  We’ve found that directors are very reluctant to actually look at their company’s financial position and if they do, they are reluctant to call an expert and have a chat.  So our tools hopefully cut through some of that.

And the answers do matter as well.  Solvency, or insolvency,  is the starting point in deciding which restructuring solutions are open to a director and also dictates what legal responsibilities a director has to other stakeholders like creditors and employees. Most importantly, if the company is insolvent, a director can be personally liable for debts incurred after the date of insolvency due to Insolvent trading and other legal provisions. So directors need to be aware of the company’s financial position and know whether it has crossed the line from “Financial Distress” to “Insolvent”.