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Thursday, 1 September 2011

Business bankruptcy - What does it mean?

The insolvency industry is full of misnomers like "company voluntary liquidation", "creditors voluntary arrangement", "going into receivership" (when they really should use phrases like administration, administrative receivership, company voluntary arrangement or creditors voluntary liquidation)

What about the word bankrupt and bankruptcy? This only applies to individuals, a company cannot go bankrupt. So when anyone talks about business bankruptcy what they really mean is that the business is insolvent. As such, it may go into liquidation. Where a personal guarantee is given for a lease or business loan then there is a possibility of the guarantor becoming bankrupt but this is unconnected to the company as an entity.

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