Insolvency in its most basic definition is the inability of a debtor to pay debts. Pre-packaged Insolvency addresses the issue and serves as an Insolvency Advice to salvage what remains of the "dying" company. This is commonly applied in companies that are at their losing end in an attempt to keep its former prestige and glory.
Laws and Legislations
The Insolvency Act of 1986 was recently amended last April 1, 2004 with the enactment of The Enterprise Act of 2002. This Act does not only amend The Insolvency Act of 1986 but also the Competition Law.
Administration and Administrator
Administration is a legal term defined within the context of The Enterprise Act of 2002 wherein companies that are at their losing end must review options on how the company goes further. It is a rescue mechanism that preserves the jobs of the workers affected, the creditors of the company, and etc. The holder of the "floating charge" is appointed to be the administrator serving as the temporary CEO of the company while it resolves certain issues regarding its Insolvency. The administrator is given due corporate power to exercise the necessary means for the company to cut down its losses and maximise whatever gains that the company might still have. The administrator is not held liable for any personal contracts that he will be making for the benefit of the company. Until proper Insolvency Advice is formulated, the Administrator will keep his function.
Insolvency Advice - Restructure, Recover, and Reward
Restructuring is a good insolvency advice to take. The company might be able to demerge from sister companies that take a toll on the income generation and can help in cutting down on losses. Even at its weak corporate state, a company still has remaining strengths and restructuring does help a lot in focusing on those strengths. The company might even be able to survive.
To recover is the next step in this process where a company moves its assets strategically so that gradually, cash flow starts to follow. Losing parts of the company can be sold to new owners and entities so that revenue can slowly begin to stabilize. It is in this area that the company more likely starts anew. Previous mistakes should be noted so that it won't happen again. Joint ventures can be formed and reconceptualization of the whole company operation is reformulated.
Reward is the most often neglected step and often not mentioned in an insolvency advice as people tend to focus more on the business that they forget why the business is there in the first place. Early retirement, annual travels, healthy lifestyle, and generally experiencing the good life. That should be the end goal of all these stresses. This will not only serve as a good motivation but gives all the people within the company to have a sense of purpose for all their toils and hard work.
An insolvency advice would not have any value at all if it is not acted upon immediately. Taking too long to decide on insolvency issues would often make matters worse and the company's name and identity is always put on the line. Decide which insolvency advice to take and act on it immediately before it will be too late.
Written by Craig Mathieson. We hope this article was helpful.
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