Insolvency

Abstract

How do effective directors ensure the company they serve is not insolvent? Based on a framework of global corporate governance best practice, which can be used in all organisations anywhere in the world, this chapter of Questions To Ask (QTA) in the boardroom gives a high-level but succinct introduction to insolvency. All directors should ensure that they have sufficient details of the financial status of the entity on an ongoing basis especially in certain situations where the risk of insolvency increases such as natural disasters, pandemics, financial crisis, and so on. The chapter considers what insolvency is and how to ensure the company doesn’t trade insolvent. This includes bringing in an external expert to conduct an independent business review, looking at what that review would cover, and knowing red flags directors should be aware of which indicate increased risk of insolvency. The chapter’s introduction leads into outlining the key Questions To Ask in the boardroom, giving the reader further insight into how to initiate discussions about the practical details requiring the attention of the board.