Solvency Analysis

Our consultants have advised numerous entities regarding their financial position and conducted a solvency analysis, including listed entities on the ASX. If you would like a solvency review of your company, please contact us.

Insolvency is based primarily on the cash flow test, being the ability to pay debts as and when they fall due. This corresponds with the definitions contained in the Corporations Act, which states an entity is insolvent if it cannot pay its debts as and when they fall due. The inability to pay debts is linked directly to the inability to obtain immediate cash and to pay debts being “due and payable”.

There are benefits in obtaining a solvency analysis. Directors that are found trading a company whilst insolvent could face serious consequences, including personal liability for debts incurred and criminal offences. As such, it is strongly recommended for Directors to get qualified opinions in regards to whether their company is insolvent or likely to become insolvent.

Is your company going under? Unfortunately, determining whether a company is insolvent is not always easy. This has been shown through numerous legal cases that have dealt with this issue. However there are key indicators commonly found in many insolvent companies which we can easily identify.