The steps involved in a formal insolvency process are as follows: Appointment of an insolvency practitioner: The first step in a formal insolvency process is the appointment of a licensed insolvency practitioner (IP) who will act as the administrator or liquidator of the company.
Investigation and assessment: The IP will investigate the company's financial position and assess the options available to maximize returns to creditors.
Notification of creditors: The IP will notify all creditors of the company's insolvency and provide them with details of the process.
Creditors' meeting: A meeting of creditors will be held to discuss the company's financial position and the proposed course of action.
Administration or liquidation: Depending on the company's financial position, the IP will either administer the company to help it restructure and continue trading or liquidate the company and sell its assets to pay off creditors.
Distribution of funds: Once the assets have been sold, the IP will distribute the funds to the creditors in accordance with the priority of their claims.
Closure: The final step in the formal insolvency process is the closure of the company, which involves deregistering the company and notifying relevant authorities of its closure.