What is Insolvency?

Different forms of insolvency

Business Insolvency

Occurs when a company is unable to pay its debts as they become due or when the value of its liabilities exceeds its assets. It can result from various factors such as declining sales, increasing costs, economic downturns, or mismanagement.

Personal Insolvency

Refers to the financial distress faced by individuals when they are unable to repay their debts on time or when their liabilities surpass their assets. It can stem from reasons such as job loss, excessive borrowing, medical emergencies, or unforeseen life events.

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You’re debts are mounting

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You’re beginning to get creditor pressure

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Cashflow is getting tighter and tighter

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Revenue is declining or you’ve lost some key contracts/customers

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You have difficulty obtaining finance or credit

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You’re in breach of your existing debt covenants

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Business Consequences

Legal actions by creditors, including winding-up petitions and compulsory liquidation.
Risk of director disqualification for not fulfilling fiduciary duties.
Damage to reputation and customer trust.
Loss of key contracts and clients.
Employee layoffs and job losses.

Personal Consequences

Legal actions from creditors, including bankruptcy proceedings.
Asset seizure and forced sale to repay debts.
Damaged credit score and limited access to credit.
Stress and mental health impact.
Strain on personal relationships.

When faced with insolvency, individuals and companies have several options to consider

Negotiating With Creditors

Open communication with creditors can lead to alternative payment arrangements or debt restructuring plans, providing temporary relief, and allowing time for financial recovery.

Business Recovery & Turnaround

For businesses, exploring strategies for restructuring, cost-cutting, and improving profitability can lead to recovery and long-term financial stability.

Insolvency Procedures

Formal insolvency procedures, such as Creditors’ Voluntary Liquidation (CVL), Administration, Company Voluntary Arrangement (CVA), or Individual Voluntary Arrangement (IVA), offer structured ways to address insolvency while minimising the impact on stakeholders.

Seeking Professional Advice

Consulting experts can provide valuable guidance on the most appropriate course of action based on the specific circumstances.

Insolvency is a challenging financial state that can affect businesses and individuals at any given time. Recognising the early signs of insolvency and seeking professional advice are crucial steps to take when facing financial distress. Taking early proactive measures is often the key to success and longer-term recovery.

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Yes – HMRC can absolutely chase a dissolved company. They have six years from the date of dissolution and twenty years if they believe and fraud or negligence has taken place.

No it will not. Being the director of a limited company limits the liability to the company. That is providing you have acted as any reasonable person would whilst running the business and not signed up to any personal guarantees or have an overdrawn directors loan account.

Fees vary depending on the level of work that needs to be undertaken and the level of specialism that needs to be given.

What is Insolvency?

Different forms of insolvency

Recognising the early signs of insolvency is crucial for individuals and businesses to take proactive measures.

The consequences of insolvency can be significant and far-reaching, impacting both businesses and individuals.

When faced with insolvency, individuals and companies have several options to consider

Frequently Asked Questions