SlideShare a Scribd company logo
1 of 15
Download to read offline
ACCOUTANCY
INSOLVENCY
AProjectWork…………
INTRODUCTION TO PRESENTERS
NAME :NUPUR
CLASS :B.COM
(HONS)
ROLL NO. :1405
COLLEGE :LBC
NAME :RITIKA
CLASS :B.COM
(HONS)
ROLL NO. :1245
COLLEGE :LBC
NAME :NEHA
CLASS :B.COM
(HONS)
ROLL NO. :1848
COLLEGE :LBC
MEANING OF INSOLVENCY
When an individual or
organization can no longer
meet its financial
obligations with its lender or
lenders as debts become
due. Insolvency can lead to
insolvency proceedings, in
which legal action will be
taken against the insolvent
entity, and assets may be
liquidated to pay off
outstanding debts.
ADVANTAGES
 They’re a great tool for extending or reducing debts
that cant be repaid.
They can help return a business to profitability,
holding the creditors back while management do
what’s needed to turn things around.
 All formal insolvency processes cause value to be
lost, but CVAs lose less than others.
Unlike other insolvency processes, you stay in control
of the business.
They’re less visible – but not entirely invisible – than
other insolvency processes.
CVAs are an incredibly flexible solution, they can
contain anything you and your creditors agree.
IMPACT OF INSOLVENCY
• We have outlined below, the effects of insolvency on the directors, advisers,
secured and unsecured creditors, but also what actions each of those parties are
likely to take when they suspect they are dealing with an insolvent company.
• In the event of a company possibly being insolvent, each group of stakeholders
should make themselves aware of some specific matters. These are outlined
below.
Directors
• Section 588 G-Directors may be personally liable for debts incurred by the
company if it trades while insolvent.
• Section 588 V- A company may be liable for the debts of a subsidiary if it allows
the subsidiary to trade while insolvent.
• We have outlined below, the effects of insolvency on the directors, advisers,
secured and unsecured creditors, but also what actions each of those parties are
likely to take when they suspect they are dealing with an insolvent company.
• In the event of a company possibly being insolvent, each group of stakeholders
should make themselves aware of some specific matters. These are outlined
below.
Directors which are as follows in the next page:
Section 588 G-Directors may be personally liable for debts
incurred by the company if it trades while insolvent.
Section 588 V- A company may be liable for the debts of a
subsidiary if it allows the subsidiary to trade while insolvent.
Section 222 Of the Income Tax Assessment Act- A director
may be held personally liable for unpaid taxes.
Secured lenders.
Insolvency is usually an event of default and may allow for
the appointment of a receiver or voluntary administrator.
Be aware that the value of the security is at risk.
Security taken after a company is insolvent may be invalid,
unless new monies are advanced.
Unsecured creditors
Section 588FA- Payment of accounts outside normal
trading terms may be recovered as an unfair preference by a
future liquidator if the liquidator can show that the creditor
had a suspicion that the company was insolvent.
CONSEQENCES
The principal focus of modern
insolvency legislation and business debt
restructuring practices no longer rests on
the liquidation and elimination of insolvent entities
but on the remodeling of the financial and
organizational structure of debtors
experiencing financial distress so as to permit the
rehabilitation and continuation of their business.
This is known as business turnaround or business
recovery.
GOVERNMENT DEBT
All governments would be in a state of insolvency
unless they had assets equal to the debt they
owed. If, for any reason, a government cannot
meet its interest obligation, it is technically not
insolvent but is "in default". As governments
are sovereign entities, persons who hold debt of
the government cannot seize the assets of the
government to re-pay the debt. However, in most
cases, debt in default is refinanced by further
borrowing or monetized by issuing more currency.
DEBT RESTRUCTING
• Debt restructuring is a process that
allows a private or public company - or a
sovereign entity - facing cash flow
problems and financial distress, to
reduce and renegotiate its delinquent
debts in order to improve or restore
liquidity and rehabilitate so that it can
continue its operations.
Insolvency regimes around the world have evolved in very different ways,
with laws focusing on different strategies for dealing with the insolvent
corporate. The outcome of an insolvent restructuring can be very
different depending on the laws of the state in which the insolvency
proceeding is run, and in may cases different stakeholders in a company
may hold the advantage in different jurisdictions.
LAWS
TYPES OF INSOLVENCY
INSOLVENCY
PERSONAL
INSOLVENCY
CORPORATE
INSOLVENCY
COMPANY
VOLANTERY
ARRANGEMENT
PERSONAL INSOLVENCY
 Bankruptcy
• Bankruptcy can be achieved on a debtor or creditor's petition. Bankruptcy
precludes an individual from being a director of a company. It also imposes certain
restrictions on the bankrupt, not least the ability to obtain credit over £500.00
without first informing the supplier of that credit that the person is an
undercharged bankrupt.
• Bankruptcy remains very much the last resort on the basis that the bankrupt's
estate vests in their Trustee in Bankruptcy on his/her appointment, this vesting
includes any interest the bankrupt has in their matrimonial home.
 Individual Voluntary Arrangement ("IVA")
• This is a contractual relationship under which a "Proposal" sets out what creditors
will receive, i.e. a percentage of their debt over a period of time, in full and final
settlement of their claim. In essence, it "ring fences" historical creditors and saves
the individual from bankruptcy, unless the IVA fails.
 Informal Agreement
• An informal agreement with creditors - is exactly as it sounds, creditors are
approached and asked to agree a repayment plan spread over a period of
time. The danger, of course, is that those creditors are not bound and can petition
for bankruptcy at any time.
CORPORATE
INSOLVENCY
Liquidation
• This can be a debtor driven Liquidation (Creditors Voluntary Liquidation)
or a creditor driven Liquidation (Compulsory). A director's executive
authority within the company is lost in liquidation, the Official Receiver or
Liquidator is tasked with gathering in all the assets of the company and
then paying a dividend to the creditors from those realizations.
Administration
• The popularity of the Administration process has arisen as a direct result
of the Enterprise Act. It is appropriate where one or more of the following
three purposes are achievable:
• rescuing the company as a going concern,
• achieving a better result for the company's creditors as a whole than if the
company was wound up, and
• realizing property in order to make a distribution to normal, secured or
preferred creditors.
COMPANY VOLANTERY ARRANGEMENTS
This is a contractual relationship between the
company and its creditors under which the company
"ring fences" those historical creditors and
undertakes to pay them a percentage of their debt
over a period of time, in a similar way to the IVA.
THANK YOU
for watchingour presentation sincerely hope you allliked it.

More Related Content

What's hot (20)

Company Accounts
Company AccountsCompany Accounts
Company Accounts
 
LIQUIDATION OF COMPANIES
LIQUIDATION OF COMPANIESLIQUIDATION OF COMPANIES
LIQUIDATION OF COMPANIES
 
Topic 8 trial balance
Topic 8 trial balanceTopic 8 trial balance
Topic 8 trial balance
 
Financial statement
Financial statementFinancial statement
Financial statement
 
Non trading concerns by Dr Mamata Rathi
Non trading concerns by Dr Mamata RathiNon trading concerns by Dr Mamata Rathi
Non trading concerns by Dr Mamata Rathi
 
Debentures
DebenturesDebentures
Debentures
 
Balance sheet
Balance sheetBalance sheet
Balance sheet
 
Ledger
LedgerLedger
Ledger
 
Vouching of cash transactions
Vouching of cash transactionsVouching of cash transactions
Vouching of cash transactions
 
Amalgamation
AmalgamationAmalgamation
Amalgamation
 
Consignment
ConsignmentConsignment
Consignment
 
Reserves and provisions
Reserves and provisionsReserves and provisions
Reserves and provisions
 
Underwriting
UnderwritingUnderwriting
Underwriting
 
Functions of commercial banks
Functions of commercial banksFunctions of commercial banks
Functions of commercial banks
 
Liquidation of Companies
Liquidation of CompaniesLiquidation of Companies
Liquidation of Companies
 
Debentures its types and Methods of Redemption of Debentures
Debentures its types and Methods of Redemption of DebenturesDebentures its types and Methods of Redemption of Debentures
Debentures its types and Methods of Redemption of Debentures
 
Issue of shares
Issue of sharesIssue of shares
Issue of shares
 
Branch accounting
Branch accounting Branch accounting
Branch accounting
 
Appointment of Auditor
Appointment of AuditorAppointment of Auditor
Appointment of Auditor
 
Rohan acs ppt
Rohan acs pptRohan acs ppt
Rohan acs ppt
 

Similar to Understanding Insolvency: Types, Causes and Impact

Module 21 - Insolvency as a restructuring approach.pptx
Module 21 - Insolvency as a restructuring approach.pptxModule 21 - Insolvency as a restructuring approach.pptx
Module 21 - Insolvency as a restructuring approach.pptxcaniceconsulting
 
Lending unit 8
Lending unit 8Lending unit 8
Lending unit 8UNBFS
 
Chapter 14: How a company is liquidated
Chapter 14: How a company is liquidatedChapter 14: How a company is liquidated
Chapter 14: How a company is liquidatedTatiana Behar Russy
 
Financial distress and your safety net during COVID-19
Financial distress and your safety net during COVID-19Financial distress and your safety net during COVID-19
Financial distress and your safety net during COVID-19Redchip
 
The Practical Side of Bankruptcy
The Practical Side of BankruptcyThe Practical Side of Bankruptcy
The Practical Side of BankruptcyAnthony Kelley
 
Insolvency : A guide for Directors
Insolvency : A guide for DirectorsInsolvency : A guide for Directors
Insolvency : A guide for DirectorsSV Partners
 
Creditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate LawCreditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate Lawterigrasmussen
 
Restructuring and Insolvency in Ireland
Restructuring and Insolvency in IrelandRestructuring and Insolvency in Ireland
Restructuring and Insolvency in IrelandMatheson Law Firm
 
FAQs COVID-19: A practical guide to frequently asked offshore law questions /...
FAQs COVID-19: A practical guide to frequently asked offshore law questions /...FAQs COVID-19: A practical guide to frequently asked offshore law questions /...
FAQs COVID-19: A practical guide to frequently asked offshore law questions /...Loeb Smith Attorneys
 
A Primer on Financial Restructurings
A Primer on Financial RestructuringsA Primer on Financial Restructurings
A Primer on Financial RestructuringsPabloVerra
 
When company directors face personal liability risk
When company directors face personal liability riskWhen company directors face personal liability risk
When company directors face personal liability riskSewell & Kettle Lawyers
 
Bad Debtor Owes Me Money!
Bad Debtor Owes Me Money!Bad Debtor Owes Me Money!
Bad Debtor Owes Me Money!Financial Poise
 
Bankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLE
Bankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLEBankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLE
Bankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLETully Rinckey
 
The Process of Corporate Debt Restructuring - Sapient.pdf
The Process of Corporate Debt Restructuring - Sapient.pdfThe Process of Corporate Debt Restructuring - Sapient.pdf
The Process of Corporate Debt Restructuring - Sapient.pdfSapient Services
 
Bankruptcy in the US Part 1
Bankruptcy in the US Part 1Bankruptcy in the US Part 1
Bankruptcy in the US Part 1DavidConaway
 
Surviving the death_of_the_old_e[1]
Surviving the death_of_the_old_e[1]Surviving the death_of_the_old_e[1]
Surviving the death_of_the_old_e[1]Steven Silton
 
Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...
Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...
Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...Financial Poise
 
12Investing in FinanciallyDistressed andBankrupt Securitie.docx
12Investing in FinanciallyDistressed andBankrupt Securitie.docx12Investing in FinanciallyDistressed andBankrupt Securitie.docx
12Investing in FinanciallyDistressed andBankrupt Securitie.docxmoggdede
 

Similar to Understanding Insolvency: Types, Causes and Impact (20)

Module 21 - Insolvency as a restructuring approach.pptx
Module 21 - Insolvency as a restructuring approach.pptxModule 21 - Insolvency as a restructuring approach.pptx
Module 21 - Insolvency as a restructuring approach.pptx
 
Lending unit 8
Lending unit 8Lending unit 8
Lending unit 8
 
Chapter 14: How a company is liquidated
Chapter 14: How a company is liquidatedChapter 14: How a company is liquidated
Chapter 14: How a company is liquidated
 
Financial distress and your safety net during COVID-19
Financial distress and your safety net during COVID-19Financial distress and your safety net during COVID-19
Financial distress and your safety net during COVID-19
 
The Practical Side of Bankruptcy
The Practical Side of BankruptcyThe Practical Side of Bankruptcy
The Practical Side of Bankruptcy
 
Insolvency : A guide for Directors
Insolvency : A guide for DirectorsInsolvency : A guide for Directors
Insolvency : A guide for Directors
 
Creditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate LawCreditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate Law
 
Restructuring and Insolvency in Ireland
Restructuring and Insolvency in IrelandRestructuring and Insolvency in Ireland
Restructuring and Insolvency in Ireland
 
FAQs COVID-19: A practical guide to frequently asked offshore law questions /...
FAQs COVID-19: A practical guide to frequently asked offshore law questions /...FAQs COVID-19: A practical guide to frequently asked offshore law questions /...
FAQs COVID-19: A practical guide to frequently asked offshore law questions /...
 
Insolvency and bankruptcy
Insolvency and bankruptcyInsolvency and bankruptcy
Insolvency and bankruptcy
 
A Primer on Financial Restructurings
A Primer on Financial RestructuringsA Primer on Financial Restructurings
A Primer on Financial Restructurings
 
When company directors face personal liability risk
When company directors face personal liability riskWhen company directors face personal liability risk
When company directors face personal liability risk
 
Bad Debtor Owes Me Money!
Bad Debtor Owes Me Money!Bad Debtor Owes Me Money!
Bad Debtor Owes Me Money!
 
Bankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLE
Bankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLEBankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLE
Bankruptcy Basics – Understanding Your Client's Options - Tully Rinckey PLLC CLE
 
The Process of Corporate Debt Restructuring - Sapient.pdf
The Process of Corporate Debt Restructuring - Sapient.pdfThe Process of Corporate Debt Restructuring - Sapient.pdf
The Process of Corporate Debt Restructuring - Sapient.pdf
 
Bankruptcy in the US Part 1
Bankruptcy in the US Part 1Bankruptcy in the US Part 1
Bankruptcy in the US Part 1
 
Surviving the death_of_the_old_e[1]
Surviving the death_of_the_old_e[1]Surviving the death_of_the_old_e[1]
Surviving the death_of_the_old_e[1]
 
Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...
Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...
Defending Against Bankruptcy Avoidance Actions (Series: Complex Financial Lit...
 
12Investing in FinanciallyDistressed andBankrupt Securitie.docx
12Investing in FinanciallyDistressed andBankrupt Securitie.docx12Investing in FinanciallyDistressed andBankrupt Securitie.docx
12Investing in FinanciallyDistressed andBankrupt Securitie.docx
 
Chapter 7 law..winding up
Chapter 7 law..winding upChapter 7 law..winding up
Chapter 7 law..winding up
 

More from Ritika Mayank

More from Ritika Mayank (6)

Bluetooth (Information Technology)
Bluetooth (Information Technology)Bluetooth (Information Technology)
Bluetooth (Information Technology)
 
Human Resource Management
Human Resource ManagementHuman Resource Management
Human Resource Management
 
Science and life
Science and lifeScience and life
Science and life
 
Street-children
 Street-children Street-children
Street-children
 
History dance ppt
History dance pptHistory dance ppt
History dance ppt
 
Brand ppt
Brand pptBrand ppt
Brand ppt
 

Recently uploaded

OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptxOAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptxhiddenlevers
 
2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptx2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptxHenry Tapper
 
Introduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptxIntroduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptxDrRkurinjiMalarkurin
 
ekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdfekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdfSteliosTheodorou4
 
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτοςΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτοςNewsroom8
 
Seeman_Fiintouch_Newsletter_Apr-2024 (1).pdf
Seeman_Fiintouch_Newsletter_Apr-2024 (1).pdfSeeman_Fiintouch_Newsletter_Apr-2024 (1).pdf
Seeman_Fiintouch_Newsletter_Apr-2024 (1).pdfAshis Kumar Dey
 
ders 3.3 Unit root testing section 3 .pptx
ders 3.3 Unit root testing section 3 .pptxders 3.3 Unit root testing section 3 .pptx
ders 3.3 Unit root testing section 3 .pptxErgin Akalpler
 
Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024Money Forward
 
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshareAon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshareHenry Tapper
 
2B Nation-State.pptx contemporary world nation
2B  Nation-State.pptx contemporary world nation2B  Nation-State.pptx contemporary world nation
2B Nation-State.pptx contemporary world nationko9240888
 
Demographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequalityDemographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequalityGRAPE
 
Global Macroeconomics: Introducing GDP 2.0.pdf
Global Macroeconomics: Introducing GDP 2.0.pdfGlobal Macroeconomics: Introducing GDP 2.0.pdf
Global Macroeconomics: Introducing GDP 2.0.pdfnqsh
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...Amil baba
 
Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...
Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...
Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...marcuskenyatta275
 
(Gender) tone at the top: the effect of board diversity on gender inequality
(Gender) tone at the top: the effect of board diversity on gender inequality(Gender) tone at the top: the effect of board diversity on gender inequality
(Gender) tone at the top: the effect of board diversity on gender inequalityGRAPE
 
What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024prajwalgopocket
 
TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...
TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...
TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...marcuskenyatta275
 
Hello this ppt is about seminar final project
Hello this ppt is about seminar final projectHello this ppt is about seminar final project
Hello this ppt is about seminar final projectninnasirsi
 
Building pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the futureBuilding pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the futureResolutionFoundation
 

Recently uploaded (20)

OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptxOAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
 
2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptx2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptx
 
Introduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptxIntroduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptx
 
ekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdfekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdf
 
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτοςΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
 
Seeman_Fiintouch_Newsletter_Apr-2024 (1).pdf
Seeman_Fiintouch_Newsletter_Apr-2024 (1).pdfSeeman_Fiintouch_Newsletter_Apr-2024 (1).pdf
Seeman_Fiintouch_Newsletter_Apr-2024 (1).pdf
 
ders 3.3 Unit root testing section 3 .pptx
ders 3.3 Unit root testing section 3 .pptxders 3.3 Unit root testing section 3 .pptx
ders 3.3 Unit root testing section 3 .pptx
 
Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024
 
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshareAon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshare
 
2B Nation-State.pptx contemporary world nation
2B  Nation-State.pptx contemporary world nation2B  Nation-State.pptx contemporary world nation
2B Nation-State.pptx contemporary world nation
 
Demographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequalityDemographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequality
 
Global Macroeconomics: Introducing GDP 2.0.pdf
Global Macroeconomics: Introducing GDP 2.0.pdfGlobal Macroeconomics: Introducing GDP 2.0.pdf
Global Macroeconomics: Introducing GDP 2.0.pdf
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
 
Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...
Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...
Test bank for corporate finance 13th stephen ross randolph westerfield jeffre...
 
(Gender) tone at the top: the effect of board diversity on gender inequality
(Gender) tone at the top: the effect of board diversity on gender inequality(Gender) tone at the top: the effect of board diversity on gender inequality
(Gender) tone at the top: the effect of board diversity on gender inequality
 
What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024
 
TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...
TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...
TEST BANK For Auditing & Assurance Services A Systematic Approach, 11th Editi...
 
Hello this ppt is about seminar final project
Hello this ppt is about seminar final projectHello this ppt is about seminar final project
Hello this ppt is about seminar final project
 
Building pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the futureBuilding pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the future
 

Understanding Insolvency: Types, Causes and Impact

  • 2. INTRODUCTION TO PRESENTERS NAME :NUPUR CLASS :B.COM (HONS) ROLL NO. :1405 COLLEGE :LBC NAME :RITIKA CLASS :B.COM (HONS) ROLL NO. :1245 COLLEGE :LBC NAME :NEHA CLASS :B.COM (HONS) ROLL NO. :1848 COLLEGE :LBC
  • 3. MEANING OF INSOLVENCY When an individual or organization can no longer meet its financial obligations with its lender or lenders as debts become due. Insolvency can lead to insolvency proceedings, in which legal action will be taken against the insolvent entity, and assets may be liquidated to pay off outstanding debts.
  • 4. ADVANTAGES  They’re a great tool for extending or reducing debts that cant be repaid. They can help return a business to profitability, holding the creditors back while management do what’s needed to turn things around.  All formal insolvency processes cause value to be lost, but CVAs lose less than others. Unlike other insolvency processes, you stay in control of the business. They’re less visible – but not entirely invisible – than other insolvency processes. CVAs are an incredibly flexible solution, they can contain anything you and your creditors agree.
  • 5. IMPACT OF INSOLVENCY • We have outlined below, the effects of insolvency on the directors, advisers, secured and unsecured creditors, but also what actions each of those parties are likely to take when they suspect they are dealing with an insolvent company. • In the event of a company possibly being insolvent, each group of stakeholders should make themselves aware of some specific matters. These are outlined below. Directors • Section 588 G-Directors may be personally liable for debts incurred by the company if it trades while insolvent. • Section 588 V- A company may be liable for the debts of a subsidiary if it allows the subsidiary to trade while insolvent. • We have outlined below, the effects of insolvency on the directors, advisers, secured and unsecured creditors, but also what actions each of those parties are likely to take when they suspect they are dealing with an insolvent company. • In the event of a company possibly being insolvent, each group of stakeholders should make themselves aware of some specific matters. These are outlined below. Directors which are as follows in the next page:
  • 6. Section 588 G-Directors may be personally liable for debts incurred by the company if it trades while insolvent. Section 588 V- A company may be liable for the debts of a subsidiary if it allows the subsidiary to trade while insolvent. Section 222 Of the Income Tax Assessment Act- A director may be held personally liable for unpaid taxes. Secured lenders. Insolvency is usually an event of default and may allow for the appointment of a receiver or voluntary administrator. Be aware that the value of the security is at risk. Security taken after a company is insolvent may be invalid, unless new monies are advanced. Unsecured creditors Section 588FA- Payment of accounts outside normal trading terms may be recovered as an unfair preference by a future liquidator if the liquidator can show that the creditor had a suspicion that the company was insolvent.
  • 7. CONSEQENCES The principal focus of modern insolvency legislation and business debt restructuring practices no longer rests on the liquidation and elimination of insolvent entities but on the remodeling of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of their business. This is known as business turnaround or business recovery.
  • 8. GOVERNMENT DEBT All governments would be in a state of insolvency unless they had assets equal to the debt they owed. If, for any reason, a government cannot meet its interest obligation, it is technically not insolvent but is "in default". As governments are sovereign entities, persons who hold debt of the government cannot seize the assets of the government to re-pay the debt. However, in most cases, debt in default is refinanced by further borrowing or monetized by issuing more currency.
  • 9. DEBT RESTRUCTING • Debt restructuring is a process that allows a private or public company - or a sovereign entity - facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its operations.
  • 10. Insolvency regimes around the world have evolved in very different ways, with laws focusing on different strategies for dealing with the insolvent corporate. The outcome of an insolvent restructuring can be very different depending on the laws of the state in which the insolvency proceeding is run, and in may cases different stakeholders in a company may hold the advantage in different jurisdictions. LAWS
  • 12. PERSONAL INSOLVENCY  Bankruptcy • Bankruptcy can be achieved on a debtor or creditor's petition. Bankruptcy precludes an individual from being a director of a company. It also imposes certain restrictions on the bankrupt, not least the ability to obtain credit over £500.00 without first informing the supplier of that credit that the person is an undercharged bankrupt. • Bankruptcy remains very much the last resort on the basis that the bankrupt's estate vests in their Trustee in Bankruptcy on his/her appointment, this vesting includes any interest the bankrupt has in their matrimonial home.  Individual Voluntary Arrangement ("IVA") • This is a contractual relationship under which a "Proposal" sets out what creditors will receive, i.e. a percentage of their debt over a period of time, in full and final settlement of their claim. In essence, it "ring fences" historical creditors and saves the individual from bankruptcy, unless the IVA fails.  Informal Agreement • An informal agreement with creditors - is exactly as it sounds, creditors are approached and asked to agree a repayment plan spread over a period of time. The danger, of course, is that those creditors are not bound and can petition for bankruptcy at any time.
  • 13. CORPORATE INSOLVENCY Liquidation • This can be a debtor driven Liquidation (Creditors Voluntary Liquidation) or a creditor driven Liquidation (Compulsory). A director's executive authority within the company is lost in liquidation, the Official Receiver or Liquidator is tasked with gathering in all the assets of the company and then paying a dividend to the creditors from those realizations. Administration • The popularity of the Administration process has arisen as a direct result of the Enterprise Act. It is appropriate where one or more of the following three purposes are achievable: • rescuing the company as a going concern, • achieving a better result for the company's creditors as a whole than if the company was wound up, and • realizing property in order to make a distribution to normal, secured or preferred creditors.
  • 14. COMPANY VOLANTERY ARRANGEMENTS This is a contractual relationship between the company and its creditors under which the company "ring fences" those historical creditors and undertakes to pay them a percentage of their debt over a period of time, in a similar way to the IVA.
  • 15. THANK YOU for watchingour presentation sincerely hope you allliked it.