Solvency Reports

A solvency report is an independent expert report that is prepared to establish whether or not a business is insolvent.

A solvency report is often required when:

• A company has received a Statutory Demand by a creditor for an outstanding debt
• Defending a winding up application in court
• There is a dispute among directors or owners
• Defending a claim for insolvent trading
• Resisting claims for voidable transactions (e.g. preferences and uncommercial transactions)

Determining whether a business is solvent or insolvent is a complex exercise that involves detailed investigations, consideration of relevant common law, the application of the “cash flow test” and consideration of the “balance sheet” test.

The cash flow test requires an examination of all the circumstances relevant to a business to determine if it was able to pay the debts that were due and payable by the due dates. A business is considered to be insolvent if it cannot pay its debts as and when they fall due and payable.

The balance sheet test involves an assessment of the items recorded as assets and liabilities and then a determination of whether liabilities exceed the assets. The business is said to be insolvent if its total liabilities exceed its total assets.

Such an assignment requires a detailed investigation usually over a fairly short period of time.

Accordingly, cooperation and access is required on a timely basis to all relevant financial accounts including:

• Cash flow Statements
• Profit & Loss Statements
• Balance Sheets
• Business Plans
• Management Reports
• Mission Statement

Our experts have extensive experience in preparing solvency reports and can also provide expert evidence in court, if required.

Contact us for more information on preparing a solvency report.