“Insolvency does not always mean the end of a company” - Insolvency experts shared this, along with the core aspects of insolvency during the ‘Debtor Focussed Insolvency Webinar’, the third webinar in the BVI Insolvency 101 series, jointly hosted by RISA BVI and BVI Finance.
According to Mungo Lowe of Forbes Hare, once a company is insolvent, it triggers a series of events where normal rules are disapplied, and a statutory scheme comes down, by which a liquidator is appointed for the purpose of realizing, taking control of the company’s assets, realizing those assets, and then distributing the assets in accordance to the statutory scheme.
“That will very much alter the regular state of affairs, with regards to creditor’s rights, member’s rights, and director’s rights. And not just rights, but also duties and obligations.”
He also explained the three circumstances set out in the insolvency act that outlines when a company will be insolvent. These include failure to comply with a statutory demand that has not been set aside; balance sheet insolvency, where the total assets are worth less than its present, future, contingent and prospective liabilities; and cash flow insolvency, where a company is unable to pay its debts.
Mr. Lowe also went on to define a statutory demand, which is a formal demand, in writing, for payment of a debt more than 2,000 USD, which must comply with the form set out in the legislation.
Important to note, is that if a statutory demand is not satisfied within 21 days of service, then the creditor can apply to appoint a liquidator. On that application the question of insolvency has been determined, and the company will be deemed to be insolvent because it has not complied with the statutory demand.
Russell Crumpler, KPMG, highlighted the first signs of financial distress and laid out the next steps for companies that are going into insolvency, while Anna Silver of FFP gave advice for companies showing signs of financial distress.
She said, “Being proactive is the way to go. This means looking at the business, understanding what the problem is, and trying to understand how you can fix that.”
Andrew Emery of Emery Cooke served as the moderator for the November 3 webinar.
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