The difference is rather simple, people go bankrupt whereas companies become insolvent.
Bankruptcy proceedings can be commenced when an individual is unable to pay their debts as they fall due. In all cases, where an individual is being bankrupted by their creditors they must be served with a notice called a statutory demand which if not paid demonstrates they are insolvent and that a petition can be issued by the individual themselves or by one or more creditors.
Winding up proceedings to liquidate an insolvent company can be brought if the person bringing them can show the company is insolvent. This can be shown by service of a notice known as a statutory demand which if not paid demonstrates insolvency. This can also be shown by tests applied to a company’s accounts – either its cash flow or balance sheet. Where the balance sheet shows liabilities exceed assets or cash flow is not available to satisfy liabilities, this will also demonstrate insolvency allowing the company or its creditors to liquidate it (“wind it up”).
In other words, if you owe your creditors more than £750.00, your creditors will be able to present a petition to the court.
At Sadozai Solicitors we are able to advise you on the alternative bankruptcy proceedings and guide you through debt management or debt relief orders.
For clients who do not own their own property or have a little surplus income and low assets together with less than £15000.00 worth of debts, they maybe able to apply for a debt relief order (DRO).
The order is made for 12 months and during this period the creditors named on the DRO are unable to take any steps or actions in order to recover those debts without the court permission. There are some requirements, which a person must meet to apply for DRO.
• Must owe less than £15000.00.
• Must not have a car, which exceed in value of £1000.00 or other assets over £300.00.
• After deduction of tax, NI contribution and normal household expenditure, the disposal income must not exceed £50.00 per month.
• Must be domiciled in England and Wales in the last three years.
• Must not have been subject to another DRO within the last 6 years.
• Must not have been involved in another insolvency proceeding at the time of application.
Administration/Receivership may be done as an alternative to liquidation, which is seen as the ultimate death of a company.
• Issuing statutory demand/setting aside statute
• Issuing and defending bankruptcy petition and applications
• Appealing bankruptcy orders
• Bankruptcy annulment
• Issuing statutory demands
• Issuing and defending against winding up petitions
• Injunction to prevent initiation or the advertisement of winding up petitions
• Advice in regard to potential directors’ liabilities, preferences and transactions at an undervalue
• Protection of assets and retention of title
• Directors’ disqualification and undertakings. Directors’ duties – wrongful trading, fraudulent trading, misfeasance
• Disclaimer / validation and vesting orders