In an economic downturn, many companies may find themselves in a position of not being able to pay their debts when they are due. Being in this position is precarious, as there is a risk of the company being wound up, causing hardship to employees, creditors and shareholders. In addition to that, creditors will rush to enforce the debts owing to them, which is usually a disorderly state of affairs. This may eventually lead to the demise of the company. But there are mechanisms in place to address the inability to pay debts, depending on what the cause is.
March 01 2009