Audio Interview

Insolvencies in the era of COVID-19

Published on June 4, 2020   19 min

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Interviewer: Today I'm interviewing Dr. Keith Pond, who is a senior teaching fellow at Loughborough University in the UK. Dr. Pond, thank you for taking the time to talk to us. So to begin, what challenges are companies facing and how are they addressing them? Dr. Pond: From the perspective of insolvency it's really very logical, being a lack of liquidity, the inability to pay your bills, wages, and suppliers as they fall due. In fact in the Insolvency Act of 1986 one of the definitions of insolvency. There will be a lot of companies out there, a lot of businesses that are technically insolvent. What's being done about them looks rather confusing at the moment, as to how people are behaving. It's not a huge leap of logic, if your revenues just fall off a cliff, there is no money coming in and you've still got loans and wages to pay, there's going to be a crunch. Interviewer: From the United Kingdom perspective, what is insolvency, what is the law and what changes are permitted because of the coronavirus crisis? Dr. Pond: That's a huge question, but let's start with the basics. There are two legal ways to become insolvent, one of them is called the balance-sheet test, and this is where a company's liabilities (the money it owes) exceed its assets, that's a technical definition.