Director information hub: Insolvency
Insolvency and your limited company.
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Contents
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. You should consider getting professional advice before deciding what the most appropriate option is for your company.
Company continuation
If, after seeking professional advice, your company is able to continue to trade, there are a variety of options, including:
- Contacting your creditors to discuss an informal agreement over unpaid bills.
- Entering into a formal restructuring plan.
- Entering into a company voluntary arrangement (CVA).
- Entering administration. This allows you to continue while you find a solution or sell property.
- Entering into a moratorium. A moratorium gives struggling businesses formal breathing space in which to explore rescue and restructuring options, free from creditor action.
Before you do anything, check your other options with a professional adviser.
If the 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 with all its assets being sold and distributed among your creditors.
If your company enters into liquidation you have a legal duty to work with the appointed liquidator (either an insolvency practitioner or official receiver).
Types of liquidation include:
Solvent and insolvent companies can be liquidated or closed.
Find out more about the options available to you when your company is insolvent.
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