Realising your company may be insolvent is stressful, but there is a structured path to follow. Acting quickly and correctly protects directors from personal risk, preserves value, and gives the best chance of a positive outcome for creditors and the business.
The below is a stripped down guide for what happens when you decide your company is insolvent and need to put it into a Creditors Voluntary Liquidation. For specific advice tailored to your circumstances, please give our office a call for a no obligation free conversation.
1. Understand What Insolvency Means
A business is insolvent if it cannot pay its debts when they fall due or its liabilities exceed its assets
2. Stop Trading Immediately if Insolvency Is Likely
Once insolvency is suspected, directors have a legal duty to prioritise creditors’ interests.
3. Seek Professional Insolvency Advice Early
Speak to a licensed insolvency practitioner to assess options.
4. Review Whether the Company Is Viable
Assess whether the business can be rescued or should be wound up.
5. Understand Your Main Insolvency Options
There are other options available which might rescue the company or the business without a formal insolvency appointment.
6. How to Wind Up an Insolvent Company (Step‑by‑Step)
7. Director Responsibilities During Insolvency
Cooperate with the liquidator, provide records, and avoid incurring new credit.
8. What Happens to Debts, Staff, and Contracts?
Employees claim statutory payments; contracts usually terminate. Debts will be collected by the Liquidator or agents acting on their behalf.
9. Common Mistakes to Avoid
Trading too long, making preferential payments, taking on new credit, or repaying directors’ loans prematurely.
10. Summary
Act quickly, stop trading, seek advice, explore rescue options. The sooner you get advice, the more options that are available along with the potential for a more orderly wind‑down.
Early Action is Key
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