Solvency Analysis

Insolvency is determined on a cash flow basis, being an ability to pay debts. This corresponds with the definitions contained in the Corporations Act, which states an entity is insolvent if it cannot pay its debts as they fall due. The inability to pay debts is linked directly to the inability to obtain immediate cash and to debts being “due and payable”.

Benefits in obtaining a solvency analysis

Directors that are found trading a company whilst insolvent could face serious consequences, including personal liability for debts incurred and criminal offences. As such, it is strongly recommended for Directors to get qualified opinions in regards to whether their company is insolvent or likely to become insolvent.

Is your company insolvent?

Unfortunately, determining whether a company is insolvent sometimes is not easy. This has been shown through numerous legal cases that have dealt with this issue. However there are key indicators commonly found in many insolvent companies which we can easily identify.

Want a solvency analysis of your business? Contact us now.