Understand the position
Clear information before you decide what to do next
Immediate steps for a director who believes a company is insolvent, including records, creditors, assets and professional advice.
- Preserve assets and accounting records
- Avoid increasing creditor losses
- Document decisions and seek professional advice
Director priorities change
When a company becomes insolvent, directors must consider the interests of creditors. The immediate focus should be preserving assets, maintaining reliable records and avoiding action that worsens losses.
Review trading before taking new commitments
Continuing to trade is not automatically prohibited, but it needs a reasonable basis and careful monitoring. New orders, deposits, credit and payments should be assessed against the company’s ability to perform and pay.
Create an evidence trail
Record board decisions, forecasts, professional advice and the reasons for material payments. Clear records help directors make better decisions and explain them later if a formal process follows.
Practical next steps
What to prepare now
A clearer picture helps the first conversation focus on realistic options.
- Protect company assets and records
- Update cash flow and creditor schedules
- Review planned payments and new credit
- Consult an insolvency practitioner or solicitor
Common questions
What to Do If Your Company Is Insolvent FAQs
Must an insolvent company stop trading immediately?
Not in every case, but continued trading must be carefully justified and should not worsen creditor losses. Professional advice is important.
Can I pay one creditor before another?
When insolvency is likely, selective payments can create risk. The purpose, timing and effect of payments should be reviewed carefully.
What records should be protected?
Accounting records, bank statements, contracts, payroll, tax records, asset information and evidence supporting director decisions should be retained.
This page provides general information and is not legal, tax or financial advice. The right action depends on the company’s circumstances. Formal insolvency procedures must be handled by an appropriately authorised professional.
