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Business Bankruptcy
If your business is on the verge of bankruptcy, you should be clear if it is a “practical insolvency” or an “absolute insolvency.” In the first case, the person or company fails to pay off their debts as they fall due. In such a scenario there are several options open. The company can collect more of their debts, cut costs and reduce stocks, pay cash for new supplies, increase or get an overdraft, lay off staff, stop giving credit, and/or increase cash sales.
In an absolute insolvency, the company has more liabilities such as debts or creditors than assets like cash, inventory or debtors, and the situation is not likely to change soon. Even though the UK has a long way to go in terms of making insolvency “respectable” as it has started to be in the US, the new UK law from April 2004 should help in achieving this.
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