Helping individuals and companies that are in financial difficulties
An Insolvency Service case study

Page 0: Introduction

Businesses provide the goods and services we need and use. Examples of goods are food, clothing and holidays. Services are provided by hairdressers, plumbers etc. where a person uses a particular skill.Businesses take a number of different legal forms, one of which can be a sole trader, run by an individual, who takes all the risk of losses in addition to any profits. This is called unlimited...
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Page 1: Helping businesses to deal with insolvency

One approach to dealing with insolvency would be to close down every insolvent business, sell off its remaining assets, and share them out among its creditors. However, this would be very wasteful. It involves breaking up productive assets and shedding many jobs, which would harm the UK economy. For example, the government would lose income tax revenues; it would also have to pay out more in...
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Page 2: Insolvency

Individuals and Insolvency The term 'bankrupt' usually refers to an individual whom the courts can declare bankrupt because he/she cannot pay his/her debts. They may be business owners but the majority of those who make themselves bankrupt are individuals who are not involved in a business. The term bankrupt comes from the Italian for broken bench, Banca rotta. The term that we now apply to...
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Page 3: Cash flow problems, consumer debt and insolvency

Cash flow Cash flow problems are a major cause of insolvency. Cash flow planning involves making sure that a business generates enough cash at the right time to meet pressing liabilities. For example, many manufacturing businesses have a cash cycle. They buy raw materials and parts on credit and then manufacture goods, which they store as stock. They then sell these goods on credit (funds...
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Page 4: The Insolvency Service in action

The Insolvency Service supervises specialists who deal with bankruptcy and one form of company insolvency i.e. compulsory liquidation. They work from 33 Official Receiver's (OR) offices across England and Wales. During 2003, the OR dealt with over 30,000 new insolvency cases. Scotland has its own insolvency regime, which operates under Scottish law. One of the aims of UK law covering insolvency...
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Page 5: Conclusion

In a business world, which is always changing, business failure is an everyday event. However, it is vital to minimise the negative effects. The Insolvency Service plays a crucial role. It creates the frameworks and processes for helping honest enterprises and individuals to get a fresh start from the problems of insolvency. At the same time it seeks to punish and eliminate dishonest...
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