You don’t have to become insolvent or bankrupt just because you are in debt. However, if you cannot pay your business debts when they become due, or if the assets of your business are less than your debts, your business is insolvent. Unless you pay those debts quickly, then the insolvency may lead to bankruptcy or winding up.
This section looks at how you can reduce your risk of insolvency by suggesting actions to take and sources of advice to approach. It also describes possible outcomes of insolvency and bankruptcy for different types of business.
Avoid insolvencyIf you monitor your business' actual performance against the budget and the cashflow forecast regularly, this will give you an early warning of potential problems. You can then take action to avoid insolvency. Read this guide for information on how to reduce the risk of insolvency.
Insolvency and bankruptcyIf your business becomes insolvent, unless you pay your debts quickly, then the insolvency may lead to bankruptcy or winding up. Bankruptcy applies to individuals such as sole traders and those that have given personal guarantees for loans. Winding up and liquidation apply to companies.
There are different routes to take depending on your business circumstances and structure. Business Links guide to Insolvency and Bankruptcy covers:
- avoiding bankruptcy and winding up
- voluntary arrangements
- administration and administrative receivership
- winding up and liquidation of companies
- insolvency of partnerships
- bankruptcy of individuals
- official receiver and insolvency practitioners
- effect of insolvency on employees
- long-term effect of insolvency
Read our guide to find out the different options for bankruptcy or winding up.
Alternatives to bankruptcyIf, despite your best efforts, you find that you are experiencing mounting debt that you are unable to repay, you may consider bankruptcy. However, you don't have to become bankrupt just because you are in debt.
Use this tool to help you understand what alternatives may be available to you and find out what other options you have when considering bankruptcy.
Access to help and support
There is a range of support available to help businesses who are concerned about insolvency and bankruptcy.
The Business Debt Line provides free, confidential and independent advice on how to deal with debt problems. You can get in touch by calling 0800 197 6026.
The Law Society provides access to a searchable database to help you find an insolvancy and bankruptcy solicitor.
The Insolvency Service provides advice on bankruptcy, compulsory liquidation and insolvency. Enquiry Line 0845 602 9848. You can find an insolvency practitioner on the Insolvency Service website.
Alternatively, find an insolvency practitioner through the R3 website - Opens in a new window.
If you would like to talk about insolvency and bankruptcy issues and how we could support your business, call the business adviser team on 0845 00 66 888 or use our contact us form