#aabrs

I was tagged by habibti badtime-for-dreamers. You da best. (loved the Augustana reference btw)

5 random facts:

1. I love thunderstorms. Like when the sky turns dark grey, I give em the ole razzle dazzle because I'm so happy.

2. My favorite flowers are lilies

3. I can't drive......yet 

4. I stepped on a toothpick once and it through my boot (that had foam bottoms) and into my foot. I thought it was a thumbtack so I sat down and snatched it out with the adrenaline running through me and saw that it was a toothpick.

5. I'm bow-legged so my knees don't touch at all when I stand up

What is insolvency? How does it happen? What effects does it bring its befallen? These questions will be answered as you read on through this cheat sheet to corporate insolvency from AABRS..

Simply defined, insolvency is a state where an entity cannot anymore fulfil its dues as they mature. Simply put, it cannot anymore pay its debts. It should not be in any way confused with bankruptcy which is more of the legal act or proceeding brought about by the former. All bankrupt companies are technically insolvent and it cannot anymore be reversed or reformed. On the other hand, being insolvent does not necessarily mean that an entity is considered bankrupt. It can still find ways to recover or at least minimize its losses through the various business recovery options available today.

There are two simple ways or tests that determine whether your business could be suffering this unfortunate fate. They are the cash flow and balance sheet tests. The former seeks to take a look at the cash flows of the entity. If its inflows are lower than the outflows or if it is significantly low that it hinders payment of obligations then you could be in bad shape. The latter sees the balance sheet and sees the asset to liability ratio. A higher amount of liability is considered an omen.

The reason for a company going insolvent is brought about by many factors. One major explanation would have to be on credit mismanagement. Others would include inability to go with the times, high competition, poor economy, inflation of raw materials and the list goes on.

The effects that it brings are quite numerous, listed are a few:

It tarnishes corporate brand and image. Suppliers, business partners, clients and customers can withdraw their support with the company. No one wants to do business with an entity that does not pay its dues.

Management and directors can be held accountable up to their personal properties if they fail to meet and prioritize creditor needs. This could happen should they choose to go on with trade to the point that liquidation becomes inevitable.

It can ultimately lead to a winding up court procedure. Should the company not act quickly, creditors may appeal to court and force the business to liquidate. Such would be a lethal blow and there would be no more turning back at this point. Any sale of assets will be considered void and bank accounts will be immediately frozen.\

YOUR LIPS ARE SO FULL AND GORGEOUS

thanks for taggin me fabulous-kebab

I have a slight fear of street cleaners (all thanks to the animated movie, Robots)

I went to boarding school for high school

I'm bow-legged so my knees don't touch when my legs are straight and I walk with my feet in a 45 degree angle.

My all-time favorite color is indigo. It's like a mix between blue and violet.

I speak French (pas courammente) 

I'm currently wearing blue

I've been on tumblr since 2011

I absolutely love thunderstorms and rain in general

I'm an April baby

AABRS Effects and Consequences of Bankruptcy

When a company is deemed bankrupt, it often entails that the entity is already unable to repay its outstanding debts and liabilities. Oftentimes this is brought about by a petition filed by the corporate creditors while in some cases it is brought about by the voluntary action by the entity itself. In such a case, the company has to repay its outstanding liabilities by selling off its assets. This of course is done after the company has been rightfully evaluated and proven to be validly bankrupt. This is done because bankruptcy relieves the debtor of its obligations that have been made prior to the filing. Apart from those already stated above, there are other consequences or effects brought about by bankruptcy. Here is a list by the professionals at AABRS.com.

EFFECT # 1: RELATED BUSINESSES CAN ALSO GET A HARD BLOW – Related business both company owned ones or even those that it deals or transacts with will be affected. Let’s take a grocery chain company for example. If they go bankrupt and close down then there is a tendency that several of its branches will be affected too not just one. Plus, the vendors or suppliers that it deals with shall lose a big client and suffer a drop in their sales.

EFFECT # 2: ECONOMIC AND SOCIAL SETBACKS CAN OCCUR – Because a bankrupt company closes down and ceases to exist so will its employees and its economic impact. Many people will lose their jobs thereby flooding the unemployment market even more which gives a bad toll on the economy in general.

EFFECT # 3: CREDIT RATING CAN GO BAD – Since the company was unable to pay off its debts and were only to do so partially or wholly by selling tis assets then this will ripple to a bad credit rating. This affects the owners of the business as this will show in their credit rating and history. Plus, if they choose to open up a new business in the near future, bad credit history and rating can hunt them.

EFFECT # 4: ASSETS AND BANK ACCOUNTS ARE FROZEN – Since the company is already in a state of financial distress, he bankruptcy process forces a freeze on its fixed assets and bank accounts. This means that the entity is no longer allowed to disburse or sell off any of its properties. This is to ensure protection of the corporate creditors.

Let’s say that you are a director in a corporation, a sole proprietor or even a partnership and you have agreed to close down due to certain reasons and even if the business is still considered solvent. What can you do? According to AABRS experts, a good option to consider is the MVL which stands for members’ voluntary liquidation. But what is it? How does it work? Will it be beneficial to you as owners, the business stakeholders and creditors?

An MVL is adopted by a solvent company who voluntarily and willingly winds up their operations. A liquidator is appointed to handle the sale of assets and the distribution of its proceeds to the appropriate parties: creditors, employees, shareholders, owners, and etcetera.

It is important to take note that such process is only to be done by a solvent company. This means that the entity is able to meet both its present and future obligations as they mature, cash inflows are strong and consistent and the value of all its assets exceed all of its liabilities, current or noncurrent.

Another thing to remember is that before you get to wind up your affairs and liquidate, the shareholders must first draft a sworn declaration of solvency which states that the business has thoroughly conducted an examination of its financial statements and that they have concluded the organization’s ability to repay any existing debts.

Additionally the company should not be facing any problems nor is there any ongoing action filed against it by one or more of its creditors. In the event that the business is found insolvent then other options should be looked into such as a pre-pack administration or creditors’ voluntary liquidation to name a few.

Now here are two common instances when an MVL is used:

It can happen in a family run business wherein the parents may have wished to retire and the children do not want to run the business or chose other fields to concentrate on.

A death, resignation or retirement of a core member of the organization has led the officers to agree that the company is best closed down due to the loss of a significant member whose skills and expertise are necessary and important for the organization to run. This is common in many technology related industries.