Although things are starting to show signs of changing, we are
still living in uncertain times. Most of us will have colleagues on
furlough, hopefully due to return shortly. Most will also have
considered, if not obtained, a loan or grant under the
government's Covid-19 austerity measures. However, the stark
reality is that many businesses will not survive these
challenges.
Although the Covid lockdown is unprecedented when it comes to
insolvency tests and measures the position remains the same as it
always has been. Insolvency is tested either on a book basis -
where the company's assets value is measured against the
company's debts - or on a cash flow basis - where the
company's ability to pay an invoice as it falls due is tested.
If you are a director, although the government has temporarily
paused the legislative "trading whilst insolvent"
prohibitions, you still need to make sure that your company stays
on the right side of both of these tests. Practically
