There are two tests to determine if your company is insolvent or not:
The Balance Sheet Test – where your company’s liabilities exceeds the value of its assets
The Commercial Test – where you cannot meet your liabilities as and when they fall due
If you meet either one or both of these tests, you need to take positive action. It might not necessarily mean that you have to deal with the company’s affairs formally as long as there is a realistic belief that the company can generate profits in the future to return the business to a solvent position.
You must be aware that if action is not taken and the position financially deteriorates over time, then there may be issues of Wrongful Trading which can lead to personal liability on the Directors for not having taken action sooner.