A company is deemed to be insolvent if it would be unable to pay all of its debts in
full with its current assets. Insolvency can happen to any company, regardless of its
size and trading history. To help avoid insolvency and to keep your business
running smoothly, keep the following tips in mind:
1. Follow a business plan and ensure it includes forecasts to help prevent
company insolvency ;
2. Maintain adequate capital reserves by having cash reserves or access to
3. Have strict credit control and debt collection procedures;
4. Make sure your accounting systems provide accurate and necessary
5. Frequently review costs and eliminate those deemed unnecessary.
For more information on the typical signs of insolvency
As director, it is your responsibility to ensure that your company remains solvent
and does not trade if it becomes insolvent. If your company becomes insolvent, do
not allow it to incur any further debt. If your company becomes insolvent or is likely
to become insolvent, it would be wise to appoint a voluntary administrator or a company liquidator at
the very first sign of insolvency, as there are serious consequences for allowing a company to continue to trade whilst insolvent.
Insolvency Services Australia (ISA) can help you and your company with any
company insolvency enquiries. For impartial and obligation-free insolvency advice,
ISA’s free 24-hour advice line is available any time that is convenient for you. Call us today on 1800 003 883.