Overview

A company, or group of companies, may find itself facing financial difficulty for many reasons. Poor trading, the loss of an important customer or supplier, excessive cost of borrowings not covered by earnings, litigation, loss of investor support. In some cases the writing may have been on the wall for some time. In others, it might be a sudden catastrophic event or change of circumstances which is the cause.

Leaving things to the last moment is of little benefit to the company's shareholders, its creditors or employees. Changes in the law, particularly the Insolvency Act 1986, have been designed to encourage directors to seek help and advice earlier, and at a time when more options may be open for saving the business.

This paper covers the legal issues involved, including the different kinds of insolvency procedure available and the implications for directors of acting improperly, or failing to act at all.

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