When cash becomes tight and pressure from HMRC, lenders, suppliers or landlords starts to bite, directors often ask the same question: what are my options and what should I do now to protect the business and myself?
This practical guide explains the full range of corporate rescue and insolvency procedures, when each may be suitable, how they work, and the key steps directors should take. It’s written for company directors and owners in England and Wales. If you’d like tailored advice on your situation, contact our insolvency solicitors for a confidential, no‑obligation chat on 0800 013 1165.
First things first: spot the warning signs and stabilise the position
Common red flags
- Persistent cash‑flow pressure (e.g., juggling payments, increasing creditor days)
- HMRC arrears (PAYE, VAT, Corporation Tax) or time‑to‑pay arrangements repeatedly missed
- Creditor threats: statutory demands, county court claims, winding‑up petitions
- Bounce‑back or CBILS repayments you can’t meet
- Loss of key contracts, supply chain or sudden energy/interest‑rate shocks
- Inability to produce reliable cash‑flow forecasts
Immediate steps for directors
- Get specialist advice early. Early engagement almost always widens your options and protects you personally.
- Create a 13‑week cash‑flow and short‑term survival plan (including critical suppliers, payroll and tax).
- Hold regular, minuted board meetings to consider solvency and document decisions.
- Avoid new credit and large one‑off payments unless clearly in the interests of creditors as a whole.
- Preserve asset value: secure stock, IP and data; keep insurance current.
- Communicate carefully with key stakeholders (lenders, HMRC, landlords, major suppliers). Ideally, with advice first.
Director duty in distress: when insolvency is probable, your duty shifts to protect creditors’ interests (BTI 2014 LLC v Sequana SA [2022] UKSC 25). Taking advice and keeping good records is critical.
Rescue and restructuring options (before formal insolvency)
1) Informal turnaround / time‑to‑pay / consensual workouts
Best for: viable businesses with short‑term cash issues or one‑off shocks.
Typical tools: forecast‑backed negotiations with lenders/landlords; HMRC Time‑to‑Pay; payment holidays; covenant resets; headcount/supply‑chain efficiencies.
Pros: flexible, private, low cost. Cons: requires creditor cooperation and credible plan; no moratorium unless combined with the new statutory moratorium (below).
2) Standalone company moratorium
Best for: companies that are viable with breathing space, needing a short stay from creditor action while a plan is developed or investment is sought.
How it works (headline points):
- Creates a short breathing space from most creditor enforcement while directors stay in control (supervised by a licensed insolvency practitioner acting as the monitor).
- Initial period is 20 business days, extendable in discrete stages if eligibility tests remain satisfied.
- You must pay new liabilities and certain ongoing/pre‑moratorium debts during the moratorium.
Use cases: stabilise trading while negotiating a refinancing, CVA or restructuring plan; protect a sale process.
Watch‑outs:
- eligibility rules apply.
- missed payments can end the moratorium.
- some financial creditors have carve‑
- careful planning is required.
Formal corporate insolvency procedures
3) Company Voluntary Arrangement (CVA)
A CVA is a binding agreement with unsecured creditors to compromise historic debt and reset obligations, often keeping the company trading.
Best for: multi‑site or contract‑based businesses where lease or trade creditor costs must be re‑based (e.g. retail, leisure, hospitality) and there’s a viable core.
Key features:
- Proposed by directors with an insolvency practitioner as nominee/supervisor.
- Creditors vote; the CVA passes if at least 75% (by value) of votes cast approve and a simple majority of unconnected creditors vote in favour.
- Can reduce/repay debt over time, vary leases and protect against most unsecured claims.
Pros: directors stay in control, avoid terminal processes and can save jobs. Cons: needs strong forecasting, stakeholder buy‑in and careful treatment of critical suppliers, landlords and tax.
4) Administration (including pre‑pack sales)
Administration is a rescue‑first process that creates an immediate statutory moratorium and puts a licensed insolvency practitioner (administrator) in control.
Best for: businesses that can be rescued as a going concern, or where a going‑concern sale can achieve a better result for creditors than liquidation.
Paths in administration:
- Trading administration: administrators continue to trade while pursuing a restructure or sale.
- Pre‑pack administration: a sale of the business is negotiated prior to appointment and completes immediately on appointment to preserve value and jobs. Independent scrutiny applies to connected party sales.
Pros: powerful moratorium, business continuity and going‑concern value preserved. Cons: director control ends, finance and supplier support needed and costs likely higher than CVA.
5) Restructuring Plan (Companies Act 2006, Part 26A)
A court supervised restructuring plan can bind dissenting classes of creditors or shareholders using cross‑class cram‑down, where statutory conditions are met.
Best for: complex capital structures or situations where some creditor classes support the plan but others object (e.g. secured/unsecured splits and landlord groups).
Key features:
- Company proposes a plan; meetings are convened by the court for affected classes.
- If the court’s tests are met, the plan can be sanctioned even if a class votes against it (cram‑down), provided the dissenting class is no worse off than the relevant alternative (often administration or liquidation) and at least one “in‑the‑money” class approves by 75% by value.
Pros: highly flexible, can restructure secured and unsecured debt and powerful cram‑down.
Cons: court intensive and relatively costly; needs robust valuation and evidence.
6) Scheme of Arrangement (Companies Act 2006, Part 26)
A scheme is a long‑standing, court supervised compromise with creditors or members. Unlike the restructuring plan, it does not offer cram‑down across classes, so it typically requires each affected class to approve by 75% in value and a majority in number. They are still widely used when broad support exists.
7) Creditors’ Voluntary Liquidation (CVL)
CVL is the most common terminal process when the company cannot be rescued.
Best for: insolvent companies with no viable restructuring route.
How it works:
- Directors/shareholders resolve to wind up and a licensed insolvency practitioner becomes liquidator.
- Trading stops and assets are realised to distribute according to statutory priority (secured creditors, expenses, preferential creditors (certain employee claims and HMRC), floating charge holders and then unsecured creditors).
- Investigations into directors’ conduct and antecedent transactions are undertaken as standard.
Pros: draws a line under losses, orderly closure and can reduce personal exposure if properly managed.
Cons: business ends and potential personal claims (e.g. personal guarantees, overdrawn directors’ loans etc.) may crystallise.
8) Compulsory liquidation (winding‑up by the court)
Usually follows a creditor winding‑up petition (commonly for tax or trade debt over £750 where the debt is undisputed). If the court makes a winding‑up order, the Official Receiver is appointed liquidator (a private IP may later be appointed). Directors lose control immediately upon the order. The cause of the company’s failure and any potential misconduct on the part of the directors will be investigated.
9) Members’ Voluntary Liquidation (MVL – solvent liquidation)
For solvent companies looking to return capital tax efficiently. Directors swear a statutory declaration of solvency, a liquidator realises assets and distributes a surplus to shareholders. MVL is not a rescue tool but is included here for completeness.
10) Receivership
- Administrative receivership: largely unavailable for new security created after 2003 but can still arise under old qualifying floating charges. The receiver acts primarily for the appointing lender.
- Fixed‑charge/LPA receivership: a secured lender may appoint a receiver over specific charged assets (often property) to collect income or sell those assets. It does not deal with the wider company and creditors.
Choosing the right route: quick comparison
- I want to keep trading and reset debts: Consider CVA, administration (trading), restructuring plan, scheme, or informal workout (possibly with a standalone moratorium).
- I need to sell the business quickly to preserve value: Consider pre‑pack administration (with appropriate connected‑party safeguards) or trading administration with a managed sale.
- There’s no viable rescue: CVL (voluntary) or compulsory liquidation (if petitioned by a creditor).
- Complex capital structure / some classes object: Restructuring plan with potential cram‑
- I’m solvent and want to close tax efficiently: MVL.
What this means for directors personally
- Duties: When insolvency is probable, focus on creditors’ interests, record decisions and take advice.
- Wrongful trading: Risk if you carry on trading and worsen creditors’ position. Keep forecasts under review and take steps to reduce loss.
- Fraudulent trading: A serious, intentional deception offence. It is rarer but carries severe sanctions.
- Antecedent transactions: Payments or transfers before insolvency may be challenged (e.g. preferences, transactions at undervalue, extortionate credit, unlawful dividends).
- Director disqualification: The Insolvency Service reviews conduct in insolvent liquidations/administrations and may seek directors’ disqualification where deemed appropriate.
- Personal guarantees/overdrawn loan accounts: Expect lenders/liquidators to pursue these. Early negotiation is often possible, and it is advisable to take legal advice at an early stage.
How the main procedures work
Company voluntary arrangement (CVA) timeline snapshot
- Feasibility: viability assessment and head‑of‑terms with key stakeholders.
- Drafting and proposal: cash‑flow modelling, landlord/HMRC engagement.
- Voting: creditors vote (thresholds above).
- Implementation: monthly contributions or compromises overseen by the Supervisor.
- Exit: on full performance, the CVA completes, and compromised debts are written off.
Administration – timeline snapshot
- Pre‑appointment planning: options report, marketing (if sale), funding/supplier strategy.
- Appointment: by court or out‑of‑court (directors/floating charge holder). Moratorium takes effect.
- Stabilise: trading strategy, asset protection, employee comms.
- Outcome: rescue via CVA/plan, going‑concern sale, or controlled realisations and exit to CVL.
Pre‑pack safeguards: where there’s a sale to a connected person within eight weeks of appointment, an independent evaluator’s report or creditor approval is required.
Restructuring plan – timeline snapshot
- Diagnostics and valuation to identify in‑/out‑of‑the‑money classes and the relevant alternative.
- Court stage 1 (convening): define classes and voting.
- Class meetings: 75% by value approval required in each class that votes in favour.
- Court stage 2 (sanction): potential cram‑down if statutory conditions are satisfied.
- Implementation: new money, amended terms, releases take effect.
Creditors’ Voluntary Liquidation (CVL) timeline snapshot
- Board and shareholder resolutions; statement of affairs.
- Liquidator appointed: employees dismissed (usually) and statutory reporting starts.
- Realisation and adjudication of creditor claims; distributions in statutory order.
- Close: final meeting and dissolution.
FAQs from directors in distress
Can I strike my company off instead of liquidating?
Not if it’s insolvent or has outstanding creditor claims. Creditors (including HMRC) routinely object. A CVL is usually the correct route to close an insolvent company.
Will I automatically be disqualified as a director?
No. Disqualification is reserved for unfit conduct cases. Good governance and early advice reduce risk.
Do employees transfer in a sale?
Often yes under TUPE on a going‑concern sale in administration, but there are exceptions and nuances. Take advice.
Will suppliers cut me off?
In many rescues, suppliers cannot terminate just because a formal insolvency starts. You must still pay for ongoing supplies.
What about Bounce Back Loans or PGs?
Expect lenders to enforce personal guarantees. Early engagement can secure settlements or standstills; we negotiate these regularly.
Why choose Tees for insolvency and restructuring advice?
- Partner‑led, pragmatic advice. I act for directors, companies, lenders and insolvency practitioners nationwide.
- Rescue mindset. With our trusted network of insolvency practitioners, we explore every genuine restructuring option before recommending closure.
- End‑to‑end support. Commercial, employment, property, tax and disputes experts under one roof.
- Local roots, national reach. Offices in Bishop’s Stortford, Brentwood, Cambridge, Chelmsford, North Herts and Saffron Walden. We advise clients throughout England and Wales.
Next step: If you’re facing creditor pressure or cash‑flow difficulties, talk to us today for a free, confidential, no obligation initial chat on 0800 013 1165, or send a message via our contact page.
Checklist for directors
- Convene a board meeting – minute cashflow concerns and decisions
- Build a 13-week cash‑flow and identify critical payments
- Stop taking deposits unless fulfilment is realistic
- Pause dividends/repayments to connected parties
- Seek specialist legal and insolvency practitioner input
- Engage lenders, HMRC, landlords strategically
- Consider moratorium, CVA, administration or restructuring plan
- If rescue not viable, prepare for CVL to minimise personal risk
This guide is general information, not legal advice. It is no substitute for legal advice tailored to the specific facts of your case.
