There are several ways to check if a company is insolvent. One way is to look at the company’s financial statements. If the company is losing money and its debtors exceed its assets, it is insolvent.
Another way to check is to look at the company’s cash flow. If the company does not have enough cash to pay its bills, it is insolvent.
Finally, you can check with the company’s creditors. If the company is not paying its bills on time, it is likely insolvent. If you are unsure whether a company is insolvent, you can consult with an accountant or financial advisor.
This article will explain those in detail, if you’re here as a company director and worried that your own company maybe insolvent, there are different steps to take. You should use our free insolvency test here to gauge the severity of your situation.
How do you know if a company is insolvent?
There are a number of indicators that a business can be insolvent. If a company is constantly losing money and has a significant debt load, that is one of the most obvious signs. The balance sheet and income statement of the company, as well as other financial statements, can be used to see this. A winding-up petition or a county court judgement (CCJ), both of which are indications of financial trouble, may also be issued to a firm.
The company may be having trouble making payments on time if its credit rating declines, which can also be a sign of financial problems. As insolvency is frequently a part of public record, news reports and press releases regarding the company can potentially reveal information about its financial standing. It is crucial to keep in mind that bankruptcy can be a complicated subject, and expert counsel may be required to fully comprehend a company’s financial situation.
Ways to check if a company is insolvent
There are several ways to check if a company is insolvent. You can look at the company’s financial statements, such as its balance sheet and income statement, to see if it is generating enough revenue to cover its debts and obligations. If the company is consistently losing money or has a high level of debt, this may indicate that it is struggling to stay afloat.
Also check if the company has been issued a winding-up petition or has had a county court judgment (CCJ) issued against it, as these are both signs that the company is facing financial difficulties. Additionally, you can monitor the company’s credit rating, as a drop in its credit score may indicate that it is struggling to make payments on time.
Finally, you can check for any news articles or press releases about the company, as insolvency is often a matter of public record and can be reported by the media. There is no official Companies House insolvency register unlike the insolvency register for individuals, for that you should use the government’s own portal mentioned in the next paragraph
Has a provisional liquidation been appointed?
The most accurate resource on provisional liquidations is the government’s on page. This page will show you an updated list of companies who have received a Winding up Petition (a final warning letter to settle debt before enforced liquidation), or who are in provisional liquidation (this is where the government appoints its own liquidator, provisionally, as a way to safeguard company assets etc).
Check the London Gazette insolvency notice
When a company goes into administration, liquidation or recievership, the appointed Insolvency Practitioner is required to post announcements in the London Gazette. Because all Notices of Appointments and Creditors Meetings have to be placed in the Gazette within 7 days, news about the company will be here first.
The Gazette has its own search which is a great resource but because it also covers changes to registered office address or ownership, personal bankruptcy notices along with a range of other announcements such as the New Year’s honours list and government announcements it can be difficult to find your way around.
Search for bankruptcy and debt relief restrictions
Again, this is not relevant for limited companies but, but the government’s updated list of bankruptcy restrictions is one potential area to check. This page details individuals who have broken the terms of a bankruptcy or Debt Relief Order
Carry out a credit check
You probably will have carried out a credit check on the company before you started to trade with them, but this could be a few years ago, and the business credit check may not be up-to date.
There are many online companies who offer credit reports – some are even free – but bear in mind that most of these only offer repackaged information that’s available from Companies House, so is no more up to date than that.
If you are a creditor, checking if a UK company is insolvent can have several benefits. If the company is insolvent, you may be able to take action to recover any debts or assets that are owed to you. This can include filing a claim with the official receiver or taking legal action to recover your debts. If you are considering doing business with a company, checking if it is insolvent can help you to assess the risk of working with the company and make informed decisions about whether to continue with the relationship.
Being aware of a company’s financial health can also help you to avoid potential legal or financial problems in the future. For example, if you are a creditor, you may be able to take steps to protect your interests if you know that the company is in financial difficulty. Overall, checking if a UK company is insolvent can provide you with valuable information and help you to make informed decisions.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.