Direct Access Barrister
Insolvency & Restructuring
Insolvency guide · please read and keep Insolvency: winding-up & bankruptcyWhen debts cannot be paid — the tools of company and personal insolvency, for creditors chasing money and for directors and debtors facing a demand Insolvency is the point at which debts cannot be paid — either as they fall due, or because liabilities exceed assets. It has two halves, personal and corporate, and it looks very different depending on which side of the debt you are on. This note sets out the main tools and what each means for a creditor chasing money, and for a company, director or individual facing a demand. It is general information, not advice on your situation — and here the short deadlines and the personal exposure make early advice especially important. 01 Personal insolvencyThe statutory demandA formal demand for payment. If you owe £5,000 or more and ignore it for 21 days, the creditor can petition for your bankruptcy — so a statutory demand must never be left unanswered. BankruptcyA court order handing your assets to a trustee to pay creditors. It usually lasts twelve months, but the consequences — for credit, certain jobs, and your home — run wider and longer. The alternativesAn Individual Voluntary Arrangement (an IVA) or, for smaller debts, a Debt Relief Order can be a better route for the right person — keeping you out of bankruptcy altogether. 02 Corporate insolvencyThe winding-up petitionA creditor owed £750 or more can petition to have a company compulsorily wound up. It is a nuclear option: once the petition is advertised, banks freeze the company’s accounts. LiquidationThe company’s assets are realised and shared among creditors, and the company ceases to exist. It can be compulsory (by the court) or voluntary (by the members or the creditors). Rescue routesAdministration and the Company Voluntary Arrangement (a CVA) exist to try to save a viable business, or to get creditors a better result than immediate liquidation would. 03 If you are owed moneyInsolvency tools are powerful ways to force payment — and dangerous if misused.
04 If you are the company, director or debtorAs insolvency approaches, a director’s duties shift — and personal exposure appears. The duty shiftsAs a company nears insolvency, its directors must begin to consider the interests of creditors, not only of shareholders. Wrongful and fraudulent tradingCarrying on and running up debts when you knew, or ought to have known, there was no reasonable prospect of avoiding insolvency can make a director personally liable. Act earlyThe sooner you take advice, the more options survive — an injunction to restrain a petition, a rescue procedure, or an orderly wind-down that limits personal risk. Waiting closes each of them in turn. Where I come in I advise creditors and debtors, companies and directors — on whether an insolvency tool is the right lever or a costly mistake, on defending or restraining a petition, and on a director’s personal exposure before it crystallises. Where a matter is contested I draft the papers and appear at the hearing. In insolvency the value of early, senior advice is unusually high, because the deadlines are short and the personal consequences are real. This note is general information about personal and corporate insolvency in England and Wales and does not constitute advice on your situation. The figures and procedures are summarised here and change from time to time; insolvency deadlines are short and the consequences serious, so take advice early. |