We see many cases where a company becomes insolvent due to an external event — whether that’s Covid, the Ukraine war energy spike, rising National Insurance and minimum wage costs, or the impact of AI on traditional business models. Sometimes it’s a significant trading issue, such as a bad debt or a loss-making contract, that has crippled cash flow and left the company in extremis.

Many of these businesses can be salvaged, provided the underlying business model remains viable.

For smaller companies, the most practical and cost-effective route is often a voluntary liquidation — not because the business has failed, but because it allows the directors to draw a line under the old company’s debts and start fresh. Administration, by contrast, is typically too expensive and too heavy-handed for companies at this scale.

The key is to speak with an experienced advisor who deals with these situations regularly. A good advisor will work with you on a recovery plan — whether that means restructuring and trading out of difficulty within the existing company, or transferring the business to a new entity and winding down the old one in an orderly way.