Guidance on options for insolvent companies

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The Insolvency Service has published new guidance on the options for managing a company’s insolvency.

The term insolvency describes both the situation an insolvent company is in and various legal procedures for dealing with that situation. An insolvent company is one that can’t pay its debts, which means either it can’t pay bills when they become due or it has more liabilities than assets on its balance sheet. Insolvent companies are in danger of being closed.

Among other points, the guidance sets out various routes to allow an insolvent company to continue to trade. For example, directors can:

  • Enter into a company voluntary arrangement.
  • Contact all creditors to see if an informal agreement can be reached.
  • Put the company into administration, offering some respite from creditor action and enabling the company to continue and property to be sold.

Alternatively, a company can be liquidated, which means it is closed down and its assets sold and distributed to its creditors.

Actions by creditors

Creditors seeking to recover their debt can get a court judgment or issue a statutory demand (official request for payment). Certain steps can then be taken to protect the debtor company from compulsory liquidation (forced closure).

If the creditors’ debts cannot be recovered through these means, they can apply to wind the company up, that is, place it in compulsory liquidation.

Read the full Insolvency Service guidance here.

Expert legal advice on insolvency matters

Gaby Hardwicke has strong working links with leading local insolvency practitioners (IPs). We can provide expert advice on the various processes, how to initiate and implement them and the legal issues that arise and have to be dealt with.

Email Commercial Law Services Partners Jeremy Laws ( or Mark Williams ( for expert advice on any insolvency issue. Or call them on 01323 435900 .

Learn about our insolvency services.

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