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Bankruptcy vs. Liquidation for Private Limited Companies

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Bankruptcy vs. Liquidation for Private Limited Companies

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Questions and Answers

What term is used for private limited companies when they are unable to pay their debts?

Bankrupt

Liquidated (correct)

Put on hold

Debtorized

What options are available to a debtor before formal procedures like bankruptcy or IVA?

Closing the business immediately

Seeking an emergency loan

Selling assets informally

Informally renegotiating payment terms (correct)

Why might an individual be unable to pay their debts as a sole trader?

Business partnership failure

They refused to pay

Personal guarantee as a director

Unlimited liability for business debts (correct)

What process is generally used for individuals who cannot pay their debts?

Insolvency Signup and view all the answers

In which situation might creditors start looking at a sole trader's personal assets to cover business debts?

When the business of the sole trader has failed Signup and view all the answers

What is the consequence of limited liability for shareholders and directors of a limited company?

They are not responsible for the company’s debts. Signup and view all the answers

Under what circumstances can a debtor be made bankrupt?

Having debts payable immediately and insufficient funds to pay them. Signup and view all the answers

When might a bank seek personal guarantees from directors of a limited company?

When the company wants to obtain bank finance. Signup and view all the answers

What is the role of the Official Receiver in bankruptcy proceedings?

To take control of all of the debtor's assets. Signup and view all the answers

What is the key difference in liability between a partnership and a limited company?

Partners are jointly and severally liable for partnership debts. Signup and view all the answers