Actions that can tantamount to an act of bankruptcy
Unless the opposite is known, Accounting always assumes that the business will continue to operate for an indefinitely long period of time, only if the business was going to be sold or closed down would it be necessary to show how much the assets would fetch. However. Many times companies get into serious financial distress/difficulties and fail to meet their financial obligations that they become insolvent.
Insolvency or being insolvent is a really unbecoming situation where a company or an individual totally fails to meet their currently maturing obligations. In such circumstances, bankruptcy proceedings may be preferred against the company/individual.
Bankruptcy means that a person or Company is unable to meet its obligations as they fall due and that the aggregate of the person’s value of the assets cannot meet the debts and or liabilities at a fair valuation.
For that matter therefore the person / Company will have committed an act of bankruptcy and will be declared bankrupt by Competent Courts of law.
Related: Doing Business in Uganda
One or More of the following actions can tantamount to an act of bankruptcy
- When one makes an assignment of His / her property (ies) to a trust for the benefit of creditors.
- An individual leaves the country or intentionally keeps away from his / her house, or registered office location with the intent to delay of defeat his / her creditors.
- Gives a notice to any of his / her creditors that he / she has suspended, or about to suspend payment of his / her debts. This is normally done in a joking way yet it carries an inner truth.
- The person or Company seating on fire files a declaration of his / her inability to pay the due debt. This is called a petition against oneself / own self.
So as a rap up the above, I want top categorically affirm that for a person or company to be declared bankrupt, Court must be petitioned. It is the courts of law which declares the person bankrupt so that you become bankrupt or poor legally. Court will proceed to appoint an official receiver.
In my next submission, I will discuss the implications of being officially declared bankrupt, and the duties of an official receiver, the turn around strategies that the bankrupt can put in place to rejuvenate his / her self. Kindly tune in. thank you.
The discussant is CPA GODREY Mpaulo, in-coming Non-Equity Partner at RONALDS PARTNERS UGANDA. Loti’s Towers Mackinnon Road Kampala.
