Skip to main content

Financial health and insolvency are the two widest points on a scale.  If your business is struggling, hold off hitting the self-destruct button by declaring insolvency, at least until you have investigated all your other options.  Here are some of them.

Business Administration

Sometimes the fundamentals of a company are decent, it just takes an outsider’s perspective to cut through the problems a company has been experiencing and set it on the road to sustainability.  This is basically the idea behind business administration.  A company can call in an administrator (in England and Wales only licenced insolvency practitioners can qualify for his role) and hand the reins of business over to them for up to a year, during which time the IP will either nurse it back to health or wind it up as cleanly as possible.

Pre-Pack Administration

Pre-Pack Administration is essentially the process of creating another company to take over the healthy parts of a struggling business, while the rest of the business is closed.  They have always been somewhat controversial because the directors of the struggling company are allowed to be directors of the new one.  This means that effectively they can walk away from debts and start again without any negative consequences.  On the other hand, however, it also means that existing employees can also be transferred to the new company and hence keep their jobs and since the new company has to buy the assets of the old one in a transparent manner, the old company’s creditors wind up with what they would have received had the original company simply been wound down.  That being so it’s hard to see any reason why this or any future government would put a stop to them.

Company Voluntary Arrangements

These are the corporate equivalents of the Individual Voluntary Arrangements which can be used by private individuals with debt issues.  The directors of a limited-liability company can appoint an insolvency practitioner to put together a proposal for what the company can afford to pay its creditors.  If creditors holding 75% of the debt agree to the proposal, then it is accepted, whether the remaining creditors like it or not.  Again, the idea here is that even though creditors get less than was originally agreed, they still wind up with more than they could reasonably expect to get if the company went bankrupt.  CVAs can be a very good option for creditors who are dealing with “knowledge-based” companies, whose main assets are their employees, who, obviously, cannot just be sold off in the way that physical assets can.  If considering a CVA remember that, as with IVAs, if you cannot meet the terms of the agreement, your company may still need to go into liquidation.


Dissolution is essentially an option for companies which have clearly reached the end of their feasible life.  It does nothing to cancel out existing debts, which is why it is important to resolve any financial issues before starting the dissolution process.  In dissolution a company pays off its creditors and then simply requests that Companies House removes the company from the companies register.  Dissolution can be the best approach to closing down companies which are based around a small number of key people where one or more of them wish to move on in some way.


Liquidation is the equivalent of an individual going bankrupt and as such it can have serious implications for those involved.  Because of this, it’s strongly recommended to look at all other options first and if it is ultimately decided that liquidation is the right choice, to get professional advice to wind up the company in a legally-acceptable manner.

Blackpool: 01253 299 399 | Carlisle: 01228 558 899