Whats the difference ?

[cassa333]

What is the differnce between a business going bankrupt and being declaired insolvent?

My (ex) boss has a couple of businesses. One is doing ok and the other went down the pan. For the one that went down the pan he had debts but has outstanding invoces that will more than cover these but once that is done won't have enough to pay more than one or perhaps two future morgage payments.

He isn't even bothering to pay our notice period or holiday so I have little sympathy for him anyway.

[Buenchico]

A business becomes insolvent when it is unable to pay its debts. (That's a simple dictionary definition, which has nothing to do with any legal process).

If the directors believe that it's possible to save the business they can apply to have the company placed into 'administration'. The administrator then runs the business, while seeking to get the company's creditors to accept only a percentage of the money owed to them and to reduce the company's outgoings (e.g. by getting rid of excess staff).

If the administrator succeeds in his task the company can apply to come out of administration, and resume trading as normal. (Several big football clubs have done that, including Leeds and Ipswich).

If an administrator can't turn a company round (or if the directors see no point in even applying for an administration order in the first place), an insolvent company will be placed into 'receivership'. The receiver will usually close the company down (although he might seek to sell any profit-making parts of the company as a going concern) and sell its assets. He will then distribute that money among the creditors.

In the UK, the term 'bankruptcy' only legally applies to individuals, and not to companies. But it's often used colloquially to refer to both 'administration' and 'receivership'. (In the USA, 'Chapter 11 bankruptcy' is roughly equivalent to our 'administration', with 'full bankruptcy' being equivalent to our 'receivership').

Chris

[Buenchico]

PS:
I've just realised that I've not even mentioned 'liquidation' which is similar to (but not identical to) 'receivership'.

However, while my post above seeks to answer your question ("What's the difference") it fails to provide you with some important information. You might still be able to get your wages and holiday pay:
http://www.direct.gov...oyees/Pay/DG_10026695

Chris

[cassa333]

Thank you Chris,

I got my pay (less holiday and notice) by cheque yesterday and put it in the bank straight away. Only time will tell if it will clear or not.

I know the failing part of his business isn't salvageable really but it does have incoming money to cover basic bills for the next couple of months.

I have heard he is just going to hand it all back to the bank. How realistic that is I don't know. He has got his other business on the market so that might help in the long term.

He earns a good salery from his main job as a partner in a gp practice though so I don't feel to sorry for him. He was just a poor businessman.