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Corporate insolvency support
Contacting an insolvency practitioner can feel like a last resort. However, if your business is facing financial pressures, early advice is invaluable.
Whether you’re facing cashflow issues, fending off creditors or struggling to obtain credit, an experienced professional can help. And if you’re exceeding overdraft limits, missing tax payments or dipping into personal finances to stay afloat, they’ll help clarify your business situation and work with you to map out the best route forward.
It's your responsibility to act
Company directors have a legal duty to act in the interests of their shareholders while a company remains solvent. However, when there is a risk of insolvency, that duty changes to prioritising the interests of creditors.
Engaging with an insolvency practitioner early can help you navigate financial distress and explore practical options to safeguard your business. The earlier you seek professional advice, the more options are likely are available.
Whatever your business and wherever you’re located, our experienced team is here to help.
What are the options if my company is insolvent?
A company is considered insolvent when it can’t pay its outgoings or debts on time. But this doesn’t necessarily mean the end for the business.
There are many different options for insolvent companies. By seeking professional advice quickly, directors can increase the chances of a successful outcome.
We can help directors to:
Explore opportunities to save the company or business, for example, finding an investor, or “white knight” who may be able to invest funds to save the company without the need for insolvency.
Enter into a company voluntary arrangement (CVA), is a legally binding arrangement to pay your creditors over a fixed term.
One of the key advantages of this route is that directors remain in control of the company ensuring, that the terms of the CVA are adhered to and the creditors are paid over the agreed period.
Enter into a restructuring plan, if eligible. This is a formal arrangement between a company and creditors designed to help avoid insolvency while ensuring fair treatment of creditors or stakeholders.
It should be noted that while this is a powerful tool it also comes with challenges, namely the cost and creditor opposition.
Place the company into administration, which is a formal insolvency route, often used when a company is facing serious financial concerns. An administrator is appointed to take control of the company, assess its financial situation and determine the best way forward, which may involve restructuring or selling the business or assets.
The goal of administration is to rescue a viable business or manage the situation in a way that best serves its creditors.
Enter into a creditors’ voluntary liquidation (CVL), a formal insolvency process initiated by the directors, where shareholders pass resolutions for the winding up of the company. It typically means the business ceasing to trade.
The role of the liquidator is to realise the assets of the company, investigate the reasons for the failure and, where funds permit, make a distribution to creditors.
A compulsory liquidation, which is a process initiated by a creditor (who is owed money) by presenting a petition to court for a winding-up order. A court hearing will then be held, during which a judge will determine if the company is insolvent and should be placed into liquidation.
Should a liquidator be appointed, they will oversee the process of identifying and realising assets, investigating the reasons for the failure, agreeing claims from creditors and, if funds permit, distributing such funds to creditors.
What to expect when choosing S&W to deal with your corporate insolvency
Our team is highly experienced, qualified and empathetic to the challenges of facing insolvency. We’ll move quickly to understand your history, review your financial position and learn about the issues you’re facing from your management team.
- Initially, through discussions with the directors, we will seek to understand the company’s background and the reasons for the current financial position
- We will seek to establish whether the company is insolvent, or may become insolvent in the future
- We can be an objective voice between stakeholders, especially when relations are strained, to navigate pathways that avoid the worst outcomes
- We offer detailed and practical recommendations, based on in-depth fact-finding and analysis, to come up with sensible, well-rounded solutions
- We explore options in detail and discuss what is appropriate in the circumstances. We’ll explore all avenues, because insolvency may not be the only option
Get in touch
Our restructuring team and expert corporate insolvency professionals can help you proactively manage financial difficulties by providing hands-on support and practical advice.
Contact Mark Supperstone, Partner, for a confidential conversation about how we can help you make the best decision for your company’s unique situation.
Frequently asked questions about corporate insolvency
What does “going into administration" mean?
When a company can no longer meet its financial obligations (for example, keeping up to date with its payments) and is at risk of insolvency, one potential route is administration. The board of directors will typically appoint an administrator, although there are also other ways one may be appointed.
Management of the company then passes from the directors to the administrator, whose duties vary but are likely to involve initially taking control of the business, assessing its financial situation and determining the best way forward. This may include some form of restructuring or selling the business or assets.
The goal of administration is to rescue a viable business or manage the situation in a way that best serves its creditors. It is a legal process, and while a company is in administration it won’t face enforcement action from creditors.
What is liquidation?
Liquidation is a formal insolvency process that is entered into when a company is unable to keep up to date with its liabilities or payments. A liquidation brings about the company’s closure.
A liquidator will seek to sell all company assets, with the intention of distributing any funds to the creditors owed money. Liquidation is sometimes called winding up.
What is a Company Voluntary Arrangement?
A company voluntary arrangement (CVA) is an agreement between a company and its creditors. It is a legally binding agreement that allows the company to pay its creditors over a fixed timeframe.
The terms of a CVA agreement can differ from company to company, but they must be approved by at least 75% of creditors. While a CVA is in place, the directors remain in control, and the company can continue trading. The terms of a CVA are supervised by an insolvency practitioner.
What is the difference between bankruptcy and insolvency?
Bankruptcy and insolvency are often used interchangeably, but they do have different meanings. Only an individual or a sole trader can be bankrupt, whereas insolvency applies to both individuals and businesses.
Insolvency describes a financial state where a company or individual can’t pay their outgoings. Find our more about bankruptcy on our personal insolvency page.
You can view our list of insolvency licensing bodies here.