Cessation - Insolvency and Bankruptcy

Insolvency applies to companies who cannot pay their debts when they become due. If a business gets into this sort of situation and the businesses assets are worth less than the debts, then this is where insolvency comes into action. Insolvency will quite quickly lead to Bankruptcy and Liquidation.
Liquidation applies to companies. Bankruptcy applies to sole traders and those who have given personal guarantees against loans. If it is seen that a business has failed really through no fault of the sole trader, then in most cases any restrictions that have been put in place through bankruptcy procedures are relaxed even removed within twelve months.

Improving Cash Flow

You need to communicate in order to try to avoid insolvency. Talk to bank, see if they could extend your finance and consider selling assets in order to raise cash. Chase up any debts that your company is owed, talk to your suppliers to see if you can rearrange payment dates, or extend credit limits with them but you shouldn’t wait until the very last minute as it could be too late.

Consider Factoring, this is where you sell any outstanding even future invoices to a third party, known as factors. They will pay off some of the debt in advance of collection and they will chase up any outstanding debts that arise.
You should negotiate all of your payments to get the best deal. You should consider before taking on any new business or new orders, whether it is possible for you to actually fulfill the orders, do you really have the money to do it.

You should make sure that you bill your own customers promptly, this should ensure that your business is paid on time for any service it has provided and prompt billing helps prompt payment. Think about employees, are there any redundancies that could be made, but try not to harm company morale by spreading feelings of insecurity.
Any creditor to which you owe £750 can approach a court and ask them to wind up your business in order to get their money.

Administration

When a company or partnership gets into financial trouble an administrator or administrative receiver may be appointed. It is their job to get the company back on its feet and trading once again. You yourself as a director can appoint an administrator or it could be an action that court takes after receiving an application from a creditor of the company. If the administrator is unable to get your business trading again or at least obtain a better result for your creditors they will then proceed to sell assets in order to help you make at least a partial payment to your preferential creditors.
The role of an administrator is to get you out of trouble and trading again.

Receivership

A creditor whose debt is secured by a floating charge can appoint an administrative receiver. This receiver works to get back money owed to that particular creditor only. The receiver can legally take over the assets covered by the charge, whether it be cash or debts owed to the business. You can find that you are left with no control over your business, and control is only given back once the debt to that creditor plus the cost of the receiver is paid in full.

Insolvency of companies

If a company just cannot be saved then a director can propose a creditors' voluntary liquidation (CVL). Creditors are informed of the situation and will inevitably appoint a liquidator. Companies can also find that a court order forces them into compulsory liquidation and a receiver is appointed to wind up the business

Avoid Bankruptcy

To avoid bankruptcy do not allow your debts to exceed your assets or you’ll find you have no capital, and you should think carefully before offering any personal guarantees for business loans. You should always maintain capital, hold on to some of the profits; don’t take out loans which would result in your borrowing being far greater than investment made into the business by yourself. Always ensure that you have good cash flow if you cannot pay bills on time you can still become insolvent. You should not look for new business while you have excessive debts, debts that you believe you will never be able to pay.

You may be able to avoid bankruptcy by entering into an arrangement with your creditors.

Informal Arrangements - usually involve family or friends who are willing to help you out in the form of cash or guarantees. Some creditors will accept this arrangement for the short term.
Formal Voluntary Arrangements - this is where your creditors vote on a proposed arrangement forwarded by you as the debtor with advice from advisors such as a licensed insolvency practitioner.
Creditors that accept your proposal cannot then sue you for repayment of your debt.

Bankruptcy of individuals

You can apply to court for a bankruptcy order yourself.
If you are unable to pay your debts when they are due and you cannot get creditors to agree to the aforementioned voluntary agreements then bankruptcy will be the only option left for you. Bankruptcy does have serious implications and it will leave you with an unfortunate history, so if you can possibly avoid it, it is best to do so.
The court will arrange for a receiver to manage your business while the bankruptcy is in progress, then when it is over the court will discharge you and you run your own finances again.