Risk is an inherent part of entrepreneurship and many a times entrepreneurs faces tough time. Businesses may go into huge debts and get into a position where they are not able to pay off the debts, have negative net assets and liabilities are more than the real assets. This condition is called as a state of insolvency. Filing bankruptcy looks like an easy option but it can be worked out and you can set your company again in operations if you handle it well.
Under the rule of law, There is a freedom to undertake any industrial activity, but there is no freedom to exit. Constitution of India gives freedom to practice any profession or to carry on any occupation, trade or business to the citizens of India, but there are restrictions on closure of any industrial undertaking. Such restriction is justified on the ground that it is in public interest to prevent unemployment. Read the complete study on Insolvency Laws in India
A preferable alternative to bankruptcy
The principal focus of modern insolvency legislation and business debt restructuring practices no longer depends on the liquidation and getting rid of insolvent(Debt) entities but on the remodeling of the financial and organizational structure of the company experiencing financial distress (remember Satyam Case ) so as to permit the rehabilitation and continuation of their business. This is known as business turnaround or business recovery.
You can hire Insolvency Practitioners who usually have accountancy background or are good lawyers, who will help in your debt restructuring and bringing your company back into operations. More options to avoid bankruptcy here
Who are Insolvency Practitioners and How Do I chose the Best?
Insolvency practitioners are people who are licensed and authorized to act on behalf of yourself and your company and their primary role is to renegotiate the payment of debts so that you do not have to resort to bankruptcy. Although bankruptcy in some circumstances may seem like an attractive option (being that outstanding debts may not have to be repaid), but it will most certainly make it very difficult for you to ever build a business again. Therefore, seeking advice from an insolvency practitioner seems essential, but you want to make sure that you chose the right one.
What are Your Personal Needs?
Before seeking advice from an insolvency practitioner, it is very important that you consider your exact personal requirements. Some services will be common to all insolvency practitioners, but you may require something quite specific. The last thing you want when faced with the turmoil of financial bankruptcy is an insolvency practitioner who does not understand how to help you out of your particular situation. Fortunately, some Licensed Insolvency Practitioners will be trained to specialize in particular areas. Choosing one of these will ensure that you get advice, guidance and insolvency services that suit your own needs.
Learn from the Professionals
It is always worth asking around, particularly if you are able to get in touch with legal professionals. If you are able to contact business accountants, it could potentially be very wise to seek their advice concerning the best insolvency and bankruptcy professionals for your personal needs. Likewise, if you can think of any associates who have used insolvency practitioners before, consider their suggestions too. It is always advisable to consider the voice of experience and of those whose opinions you value and trust.
Scour the Local Court Panels
It would be worth your while doing a little research around the local court panels. See if you can locate practitioners who are on your local insolvency court panels. These individuals will of course have a history of court experience to draw on in considering your individual situation.
Don’t settle for Second Best
If you’ve managed to do all of the above, then you should have a pretty good idea of your personal needs and what both you and your business specifically require from an insolvency practitioner. This may mean that you have to pay more for them than if you had gone with a less experienced person. Do not be tempted to go for the cheaper option if it’s a more expensive service you require. Tempting though it may be under your current economic circumstances, you will not find your way out of debt by saving a few pennies on an insolvency practitioner who isn’t fit for the job.
Last but not the least, your world doesn’t end with your business, let the hope always prevail, that’s what real entrepreneurship is all about. Good Luck !