And if we ask the same questions in the United States, what are the answers? How about in Cayman?
Per ARKle Insight
Tuesday, 4 March 2014
Posted by Mark Sargent at 07:45
In Whose Best Interests Is The Company Being Run?
Should a company be run in the interests of the employees?
Or of the banks?
Or Her Majesty’s Revenue and Customs?
Or someone else perhaps?
In fact the situation itself dictates in whose best interests the Directors are required to run a business. In the ordinary course of affairs, Directors are obliged to run a business in the best interests of its shareholders. That is to say the decisions they make should maximise the returns to shareholders after meeting all the other obligations of the business, like paying creditors and taxes.
When things are not going so well, the situation changes. Insolvency practitioners apply two tests to a business to decide whether or not it is solvent. The first is cash flow: can the business pay its debts when they fall due? The second is the balance sheet: when all the assets and liabilities are totalled up, is the balance sheet positive or negative? If the company falls short in either case it’s technically insolvent, and the IP is likely to suggest administration or liquidation as the remedy.