Trading with an insolvent company

Any creditor, supplier or customer will know that once a company is in financial difficulties, the chances of arrears being recovered reduce substantially. The degree to which this happens depends on many factors, including what sort of process the company is in, what security is in place for the creditor, what is the plan for the company going forward, and what is the market position of the company.

Trading with a distressed company

When a company is in financial difficulties, but not yet in a formal insolvency process, there are more options for a creditor and supplier to protect themselves on a subsequent insolvency. Through good communication with the company, continued support of the company may lead to a greater recovery of arrears and more secure terms going forward if negotiated properly. Creditors and suppliers should also tighten up their terms with any distressed company in order to reduce risk and maximise recovery. For more discussion on this and helpful guidance see Practice Note: A creditor’s guide to dealing with a company in financial difficulty.

Trading with a company in a formal insolvency process

Trading

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