The law recognises and expects some businesses to fail. Corporate entities such as companies exist to allow individuals to pursue and invest in business opportunities through a vehicle that provides them with limited liability and which allows them to manage, and contain, their risk.

Disputes often arise from business failure because the company will not have sufficient funds to satisfy all the claims and expectations of its creditors and investors.

Secured creditors will rely on having adequate security to pay their debts in full. Unsecured creditors will be satisfied only to the extent that the company’s assets can meet its liabilities and/or they have guarantees from third parties.