A bankruptcy order might be the right outcome. If a taxpayer is
hopelessly insolvent, their financial affairs will be taken out of
their hands and a line will be drawn for both debtor and creditors.
In the long run, bankruptcy allows a fresh start. That is its
purpose.
If a company is hopelessly insolvent and is allowed to
continue trading, it may
If a business is simply not viable, a winding up order ensures that it will cease to trade and that it will not bring down other businesses.
If the tests for insolvency were applied strictly many viable
businesses could be shown to be 'insolvent'. Many companies depend
heavily on borrowing or hire purchase and have their money tied up
in working capital. They will find it difficult or impossible to
pay all their debts on demand and may have short-term problems in
paying large tax debts.
Most businesses are not usually faced with demands from every
creditor at the same time and with some juggling are able to trade
successfully and pay their debts. Other businesses, which are more
deeply insolvent, face liquidation but if given time will be able
to turn their business around and pay creditors a much better
return than if they were in liquidation.
