Solvency Assessments of Debtors
If you are pursuing winding up or bankruptcy proceedings against a debtor, the debtor may defend the proceedings claiming it is solvent. We can thoroughly review the solvency report produced during the recovery proceedings and provide you with an independent assessment of the alleged solvency of the debtor.
Solvency Assessment in Legal Recovery Action
If you are owed a debt exceeding $2,000 by a company, then you can pursue an application in Court to have the company placed into liquidation.
If you are owed a debt greater than $5,000 by an individual, then you can pursue bankruptcy proceedings against that person.
During the legal proceedings, the debtor may seek to resist being placed into liquidation or bankruptcy by submitting evidence that it is solvent.
Determining whether a business is solvent or insolvent is a complex exercise that involves detailed investigations, consideration of relevant common law, the application of the “cash flow test” and consideration of the “balance sheet” test.
The cash flow test requires an examination of all the circumstances relevant to a business to determine if it was able to pay the debts that were due and payable by the due dates. A business is considered to be insolvent if it cannot pay its debts as and when they fall due and payable.”
The balance sheet test involves an assessment of the items recorded as assets and liabilities and then a determination of whether liabilities exceed the assets. The business is said to be insolvent if its total liabilities exceed its total assets.
Our Services Include:
We have the expertise to review the solvency report of the debtor to provide:
- An independent assessment of the alleged solvency position of the customer; and
- Expert evidence on the solvency position of the customer during any legal proceedings.
We will explain the result of our findings with you in clear and concise English.
