Insolvency & Bankruptcy: Pre-Insolvency Action

The right Pre-Insolvency Action can maximise the value of a business for sale as a going concern or funds for its creditors.

Although owners of businesses do not wish to contemplate the winding up of their business, unfortunately circumstances can make this type of situation something which has to be contemplated.

In certain circumstances a business has no control due to unfortunate and unforeseen trading difficulties. However, if there is time and the winding up of the business can be foreseen, there are certain steps which can be considered and taken to maximise the value of the business and increase funds for creditors. This can assist also the owners with regard to personal guarantees and capital invested. There may be a potential sale which will keep the business going in a different form or alternatively, creditors who are owed money may have a better chance of being paid.

The key steps which should be undertaken include:

  • Check all of the ongoing contracts. If they are not completed, consider whether the benefit of the contracts can be assigned or taken over by another similar business (called a novation) possibly for a fee.
  • Endeavour to complete all contracts which are close to completion and agree the value of all outstanding accounts.
  • Make sure, as far as possible, payment is received of all monies outstanding in relation to current contracts. Certain commercial contracts may contain clauses which suspend the right to receive payment on an insolvent event. As such, getting payment in before the insolvent event is the best approach.
  • Make sure all debtors pay within the terms.
  • Make sure all records in relation to contracts where there may be ongoing claims are in order and preserved.

Overall, it is important to take the correct professional advice as soon as it is considered that insolvency may be a possibility.

If you would like to discuss this in more detail, without obligation, please contact Else Solicitors at

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