Guidance

Director information hub: Insolvency

Insolvency and your limited company.

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What is insolvency?

Your company is insolvent when it cannot pay its debts on time or has more liabilities than assets on its balance sheet.

It does not always mean that your company must stop trading however you should get professional advice before doing so.

Company continuation

If, after seeking professional advice, your company is able to continue, there are a variety of options, including:

  1. Contact your creditors to discuss an informal agreement over unpaid bills.

  2. Enter into a formal restructuring plan.

  3. Enter into a company voluntary arrangement (CVA).

  4. Enter administration. This allows you to continue while you find a solution or sell property.

  5. Enter into a moratorium.

Before you do anything, check your other options with a professional adviser.

Company cannot continue

If insolvency means there is no way to continue trading, then you have the option to liquidate your company.

Liquidation involves closing down your company and all its assets being sold and distributed among your creditors.

If your company enters into liquidation you have a legal duty to work with a ‘liquidator’ (either an insolvency practitioner or official receiver).

There are 3 different types of liquidation:

Solvent and insolvent companies can be liquidated or closed.

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Updates to this page

Published 7 July 2023

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