Corporate Insolvency Is Not The End Of The Game
There is an old saying that engaging in business is like gambling. Although this may be not true, as no one does business by chance, luck, or to lose, the risk of losing in a business is always around. Business is conducted primarily for profit and anything other than that is bad business. Engaging in a losing business or a business that is stagnant is not just a waste of capital, but a waste of time and effort. That is why businesses hire a good manager, often the one highly educated, with MBA or highly experienced in the industry. Management policies are formulated and marketing plans are designed to meet the top performance of the company. After investing so much on the training of the office staff, research and development of products and services, no businessman would expect that corporate insolvency will still result.
Corporate insolvency is not the same with bankruptcy. The latter is the state where all of the assets or substantially all of the resource of a company has depleted or is totally gone. On the other hand, corporate insolvency is a state where the liabilities of a certain corporation are more than its assets. Insolvency does not automatically result to bankruptcy.
Even corporation with million dollars of assets is insolvent is when it has liabilities to its creditors amounting to 5 million dollars. While corporate insolvency may not sound good in business, it is not actually the end of the business. Sometimes insolvency is caused by the fact that assets of the corporation are not liquid or at the instant point in time, liabilities exceeded its assets.
There is no need to panic during times of corporate insolvency as there are measures to solve this business situation. Often than not, businesses panic when they are in the state of insolvency which lead to bad management decisions that lead to more serious business problems. This is the reason why experts in corporate rehabilitation are called. They are experts in this financial situation which gives a third party evaluation and formulates business saving measures to keep the life of the corporation. Resorting to these experts is often better than going to court for declaration of insolvency as the court may appoint a creditor as receiver for the company. This creditor that the court appointed has pecuniary interest in the insolvent corporation and will most likely not act impartially.
There are alternative business solutions to save corporate insolvency. The remedies may be intended to extend the life of the corporation or to just to satisfy the claims of the creditors. One of the solutions that may save the corporate existence is record reconstruction. Some assets are not considered because of erroneous recording and can be cured by tracing of funds, reconstructing the wrong recording, and finally recovering such asset for the benefit of the corporation. Other solutions make corporate insolvency less financially and emotionally draining. This provides for the proper disposition of assets in favor of the creditors and the corporation as well. This will eventually result to the proper dissolution and winding up of the corporation.
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