A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Company insolvency - what it means and what to do next
A company is insolvent when it fails either of two legal tests: it can't pay its debts as they fall due (the cash flow test), or its liabilities exceed its assets including contingent ones (the balance sheet test).
Insolvency is a state, not a sentence - what matters is what directors do once it's recognised.
What changes the moment a company is insolvent
Directors' duties shift from shareholders to creditors: from that point, decisions are judged by whether they protected creditors' interests, and trading on recklessly becomes personally risky.
That's why recognising the state early - see the warning signs and the two tests explained - is itself a form of protection.
Insolvent doesn't automatically mean liquidation
An insolvent company with a viable underlying business has rescue routes: Time to Pay, a CVA, or administration.
An insolvent company without one needs an orderly ending - a Creditors' Voluntary Liquidation - started before a creditor forces a compulsory one.
Our guide to your options when insolvent maps the decision in full.
The next steps, in order
Stop increasing creditor exposure; get an honest picture of debts, assets, and cash; and take licensed advice - the first conversation is free, and taking it promptly is the single act that most protects your own position.
Call our licensed insolvency practitioners in Manchester on 0333 023 5090 - free, confidential, and directly with an ICAEW-licensed IP.
InsolvencySupport.co.uk is operated by Xeinadin Corporate Recovery Limited (company no. 11415156), 8th Floor, 100 Barbirolli Square, Manchester M2 3BD. Our insolvency practitioners are licensed and regulated by the ICAEW.
This page is intended for general information purposes only and does not constitute financial, legal, or professional advice. Always take advice from a licensed insolvency practitioner about your specific position.