If a company goes into insolvency it means that it is unable to pay its debts as they fall due. The company may enter into administration, where an administrator takes control of the company to try and save it, or it may enter into liquidation, where its assets are sold to pay off its debts. In some cases, the company may be able to enter into a Company Voluntary Arrangement (CVA) with its creditors to restructure its debts and continue trading.

Corporate structure is important for businesses as it determines the legal and financial responsibilities of the company and its owners. It also affects the way the company is managed and how decisions are made. companies must have a legal structure, such as a limited company or partnership, to operate and comply with legal requirements. The structure also impacts taxation, liability, and ownership of the business.

The different types of corporate structures include sole trader, partnership, limited liability partnership (LLP), private limited company (Ltd), public limited company (PLC), and community interest company (CIC). Each structure has its own legal requirements and benefits, such as limited liability protection for shareholders in a Ltd or PLC, and social or environmental objectives for a CIC.

The signs of corporate insolvency include inability to pay debts as they fall due, outstanding debts that exceed assets, legal action taken by creditors, and a decrease in cash flow. Other signs may include a decline in sales, loss of key customers, and inability to secure financing. It is important for directors to seek professional advice if they suspect their company may be insolvent.

Under UK law, there are several tests to determine if a company is facing insolvency, including the cash flow test, balance sheet test, and the inability to pay debts test. The cash flow test examines whether the company can pay its debts as they fall due, while the balance sheet test looks at whether the company's liabilities exceed its assets. The inability to pay debts test considers whether the company can pay its debts in full within a reasonable timeframe.

Directors should seek professional advice from a licenced insolvency practitioner and act in the best interests of the company and its creditors. They should also ensure that they are not trading while insolvent and consider options such as restructuring, refinancing, or entering into a formal insolvency process such as administration or liquidation. Failure to act appropriately could result in personal liability for the directors.

If appropriate insolvency actions are not taken, the directors may be held personally liable for any debts incurred by the company during the period of insolvency. This could result in the directors being disqualified from acting as directors in the future, facing legal action, and potentially losing personal assets to pay off the company's debts.

Directors have a legal obligation to act in the best interests of the company and its creditors in the event of corporate insolvency. They must take steps to minimise losses to creditors, including ceasing trading if necessary, and must not continue to trade if the company is insolvent. Directors may also be held personally liable for any wrongful or fraudulent trading that occurs during insolvency.

A corporate insolvency solicitor provides legal advice and representation to companies facing financial difficulties and insolvency. They assist with restructuring and turnaround plans, negotiate with creditors, and advise on the legal implications of insolvency proceedings such as administration, liquidation, and voluntary arrangements. They also represent clients in court and provide guidance on directors' duties and liabilities.

The options for restructuring a company in financial difficulty include administration, company voluntary arrangement (CVA), and liquidation. Administration involves appointing an administrator to manage the company's affairs and explore options for restructuring or selling the business. A CVA is a legally binding agreement between the company and its creditors to repay debts over a period of time. Liquidation involves selling the company's assets to pay off creditors and winding up the business.

The process for entering into administration involves appointing an insolvency practitioner to act as the administrator. The administrator will then take control of the company and assess its financial situation. They will work to develop a plan to rescue the company or, if that is not possible, to achieve the best possible outcome for creditors. The process can be initiated by the company, its directors, or a creditor.

The process for liquidating a company involves appointing a licenced insolvency practitioner to act as the liquidator. The liquidator will then sell the company's assets, pay off any outstanding debts, and distribute any remaining funds to shareholders. The company will then be dissolved and removed from the Companies House register. There are two types of liquidation: voluntary liquidation, initiated by the company's directors or shareholders, and compulsory liquidation, initiated by a court order.