Insolvency options

What happens when a company cannot pay, and the choices before it gets there.

What it means

Formal options include a company voluntary arrangement, administration, creditors' voluntary liquidation and compulsory liquidation. Informal options include time to pay arrangements and negotiated settlements.

Why it matters

The earlier advice is taken, the more options exist. By the time a winding-up petition is served, most of them have gone.

What it looks like in practice

A CVA is an agreement with creditors to pay part of the debt over time, and the business continues. Administration provides breathing space with a view to rescue or a better outcome than liquidation.\n\nHMRC's Time to Pay is available and is far easier to agree before enforcement starts.

What to watch out for

Directors continuing to trade and take credit once insolvency is likely — see wrongful trading. And "phoenix" arrangements, which are lawful in defined circumstances and unlawful outside them.

Where to get proper advice

A licensed insolvency practitioner — check the register — and a solicitor. The first conversation is usually free and going early is the whole point.