Insolvency rarely happens suddenly. It develops over time, often signalled by warning signs that directors should not ignore.

Key red flags include:

  1. Inability to pay debts as they fall due
  2.  Liabilities exceeding assets
  3. Repeated unsuccessful turnaround efforts
  4. Increasing pressure from suppliers or withdrawal of credit
  5. Banks tightening terms or refusing extensions 

Recognising these indicators early allows directors to act before the situation deteriorates further.
Ignoring these signs may result in breaches of directors’ duties and increased exposure to creditor claims. Early action can enable restructuring options or, where necessary, an orderly liquidation.

At RSM Malta, we support directors by carrying out objective viability assessments that help inform timely and well‑considered decisions.

Where these warning signs are present, an independent assessment can help clarify the company’s position and the practical options available.

Article written by Donald Schembri – Partner, Outsourcing.