Insolvency options for limited companies


The Corporate Insolvency and Governance Act 2020 (the “Act”) has made permanent changes to insolvency law in Northern Ireland and to company law, which applies on a UK wide basis.


The Act introduces a free-standing moratorium to give UK companies a “breathing space” in which to pursue a rescue or restructuring plan. During this moratorium, no creditor action can be taken against the company without the court’s permission. The moratorium is overseen by a monitor (an insolvency practitioner) but responsibility for the day-to-day running of the company remains with the directors (a “debtor-in-possession” procedure).

Restructuring plan

There is a new restructuring plan to help viable companies struggling with debt obligations. Courts can sanction a restructuring plan (that binds creditors) if it is “fair and equitable”. Creditors vote on the plan, but the court can impose it on dissenting creditors (known as “cross-class cram down”).

Termination clauses

There is a prohibition on termination (or “ipso facto”) clauses that can apply when a company enters an insolvency procedure, a moratorium or begins a restructuring plan. The Act prevents suppliers from stopping their supply while a company is going through a rescue process to maximise its chances of success.

The Act includes safeguards to ensure that continued supplies are paid for, and suppliers can be relieved of the requirement to supply if it causes hardship to their business (small suppliers were exempt from the obligation to supply until 30 June 2021 so that they could protect their business if necessary).

Insolvency options

If your company is unable to pay its debts, you should take financial and legal advice. There are several options for limited companies, including:

  • Informal arrangements
  • Informal 'family' arrangements
  • Company voluntary arrangements
  • Administration

Informal arrangements

Involves writing to all your creditors to see if an acceptable agreement can be reached. It is advisable to include a timetable of when payments will be made.

Informal 'family' arrangements

Where family and friends may be prepared to give or loan cash or provide guarantees to help in the short term. Creditors may be prepared to agree to this.

Company voluntary arrangements

This is a formal version of the informal arrangement. The company directors need to apply to the court with the help of an authorised insolvency practitioner (IP). The IP supervises a meeting with creditors to agree a repayment plan which must be adhered to.


If you are advised by your accountant or solicitor that no arrangement or period of administration is likely to save your company, then you or your creditors may propose liquidation.