Your main company insolvency options fall into three groups: rescue the business, restructure its debts, or close the company down in an orderly way. Which route fits depends on whether the company can trade profitably again, how much pressure creditors are applying, and what you want to happen to the business and its people. This guide maps every formal route side by side, in plain English, so you can see where you stand before choosing anything.
Nothing here is a decision you have to make alone or today. The point of understanding the full menu is to walk into a conversation with a regulated specialist already knowing the language and the trade-offs.
What "insolvent" actually means
A company is insolvent when it can no longer meet its financial obligations. UK law recognises two tests, set out in the Insolvency Act 1986. You only need to fail one.
- The cash-flow test: the company cannot pay its debts as they fall due.
- The balance-sheet test: the company's liabilities are greater than its assets.
Warning signs usually arrive before a formal test is failed: mounting HMRC arrears, pressure from suppliers, bounced payments, or a demand letter. Recognising insolvency early matters because your legal duties shift. Once a company is insolvent, or heading that way, your primary duty moves from the shareholders to the creditors as a whole.
You can read the framework directly in the Insolvency Act 1986 on legislation.gov.uk. The important point for now: being insolvent is a situation, not a verdict, and there is more than one way through it.
The full menu of routes: rescue, restructure, or close
Every formal option sits under one of three aims. Getting clear on your aim narrows the choices quickly.
- Rescue — keep the company or its business trading, often through administration or a pre-pack sale.
- Restructure — agree a way to pay creditors over time while continuing to trade, usually a Company Voluntary Arrangement (CVA) or a moratorium.
- Close — bring the company to an orderly end through liquidation or dissolution, paying what can be paid.
Some routes overlap. A company might enter administration to protect it, then move into a CVA or a liquidation. Others rule each other out. The sections below take each aim in turn, and if you already sense which direction fits, our guide to whether you should be looking at What Is Company Administration? A Director's Guide or a closure route is a useful next step.
Rescue and restructure options: administration and CVA at a glance
These routes are for companies where there is still something worth saving — a viable core business, valuable contracts, or a brand and workforce that could survive with breathing space.
Administration
Administration puts the company under the control of a licensed insolvency practitioner (the administrator) and creates a legal pause on most creditor action. It is often used to sell the business as a going concern or to secure a better result for creditors than immediate closure. Two common questions are How Long Does Company Administration Last? and how it compares with simply liquidating — covered in Liquidation vs Administration: A Director's Guide.
Pre-pack administration
A pre-pack is where a sale of the business is arranged before the company formally enters administration, then completed straight afterwards. It can preserve jobs and value but attracts scrutiny, especially where the buyer is connected to the existing directors. Weigh it up with What Is a Pre-Pack Administration? and the balanced view in Pre-Pack Administration: Pros and Cons.
Company Voluntary Arrangement (CVA)
A CVA is a formal deal to repay creditors part or all of what they are owed, usually over three to five years, while the company keeps trading. Creditors vote on it, and if enough agree, it binds them all. See What Is a Company Voluntary Arrangement (CVA)?, and compare it with the alternatives in CVA vs Liquidation: What's the Difference? and CVA vs Administration: Which Suits Your Company?.
Moratorium
A standalone moratorium gives a struggling but viable company a short, court-backed pause from creditor action to consider a rescue. It is explained in What Is a Company Moratorium?.
Closure options: CVL, compulsory liquidation, MVL and dissolution
Where rescue is not realistic, closing the company cleanly protects both creditors and directors. The right closure route depends on whether the company is insolvent and whether creditors have already gone to court.
Creditors' Voluntary Liquidation (CVL)
A CVL is the most common way for directors to close an insolvent company on their own terms. The directors appoint a liquidator, who sells the assets and winds the company up. Start with What Is a Creditors' Voluntary Liquidation (CVL)? and the practical overview in How to Close a Limited Company With Debts. If cash is tight, How to Liquidate a Company With No Money explains what is still possible.
Compulsory liquidation
Compulsory liquidation is closure forced by a creditor — often HMRC — through a winding-up petition and a court order. Directors lose control of the process. The differences are set out in What Is Compulsory Liquidation? A Director's Guide and Voluntary vs Compulsory Liquidation Explained.
Members' Voluntary Liquidation (MVL)
An MVL is for solvent companies — where you can pay all debts but want to close and distribute the remaining funds tax-efficiently. It is not an insolvency route, but it is worth knowing where the line sits: see What Is a Members' Voluntary Liquidation (MVL)? and MVL vs CVL: Solvent or Insolvent Liquidation?.
Dissolution (striking off)
Dissolution removes the company from the Companies House register. It is cheap and simple, but it is only appropriate for companies with no significant debts. Trying to strike off a company that owes money is risky and often challenged. Understand the limits through How to Dissolve a Company: Striking Off Explained, Liquidation vs Dissolution: What's the Difference? and Strike Off vs Liquidation: How to Choose. If debts are involved, read Can You Strike Off a Company With Debts? and, if a creditor has already objected, Company Strike Off Objection: What Happens Now?. The formal process is described on gov.uk's guide to striking off your company.
What each route means for you as a director
Directors understandably worry about personal consequences. In most cases, the protection of limited liability holds — but it depends on how you have acted and which route you take.
- Your role changes: in a liquidation or administration, an insolvency practitioner takes over and you hand across records and cooperate.
- Conduct is reviewed: the office-holder examines directors' conduct in the run-up to insolvency. Acting responsibly once you knew of trouble matters.
- Personal guarantees stand: any debts you personally guaranteed remain your responsibility, whichever route the company takes.
For a fuller picture, see What Happens to Directors in Liquidation? and What Happens to Company Assets in Liquidation?. If you are weighing company closure against your own position, Company Liquidation vs Bankruptcy Explained untangles the two.
Rough costs and timelines compared
Costs and timescales vary with the company's size, assets and complexity, so treat these as general ranges rather than quotes.
- CVL: typically a few thousand pounds in practitioner fees, often funded from asset sales; the process itself can take several months to a year or more to conclude. See How Much Does It Cost to Liquidate a Company? and How Long Does Company Liquidation Take?.
- Administration: usually higher cost given its complexity; the appointment commonly runs up to a year and can be extended.
- CVA: set-up fees plus ongoing supervision, spread across a repayment term of typically three to five years.
- Dissolution: the cheapest option by far — a small Companies House fee — but only safe for a company with no outstanding debts.
A quick side-by-side on the two routes directors most often confuse is in CVL vs Administration: Key Differences Explained.
How to narrow it down: questions to ask yourself
You do not need to pick a route from a standing start. Work through a few honest questions and the field narrows on its own.
- Is the business itself viable? If a profitable core could survive with breathing space, a rescue or restructure route is worth exploring. If not, an orderly closure is usually kinder to everyone.
- Has a creditor already gone to court? A winding-up petition changes the picture and shortens your options, so it needs prompt, specialist attention.
- Can the company pay all its debts? If yes, you are looking at solvent options like an MVL or dissolution. If no, insolvent routes apply.
- What matters most to you — jobs, cost, speed, or a clean line under it? Being clear on your priority helps a specialist point you to the right insolvency routes for directors in your position.
There is rarely a single "correct" answer — most decisions balance cost, control and consequences. A regulated insolvency practitioner can model the realistic outcomes for your specific numbers.
Frequently asked questions
Which company insolvency option is cheapest?
Dissolution is the cheapest on paper, needing only a small Companies House fee, but it is only suitable for a company with no real debts. Among insolvent routes, a CVL is usually the most cost-effective way to close, and its fees are often met from the sale of company assets rather than out of your own pocket.
Which route is fastest?
Dissolution can be quick for a debt-free company, often completing in a few months. For an insolvent company, a CVL can be started within days once you decide to proceed, though fully winding up the company takes longer. Compulsory liquidation is dictated by the court's timetable, not yours.
Do I have to choose a route right now?
No. Unless a creditor has already issued a winding-up petition, you generally have time to understand the options and take proper advice first. What matters is not leaving it so long that the choice is taken out of your hands. Acting steadily and early keeps more doors open.
Can I just close the company and walk away?
If the company owes money, no — striking it off to avoid debts can be reversed and may lead to a creditor objection or an investigation into directors' conduct. Where there are debts, a formal liquidation is the proper route, and it protects you by dealing with creditors correctly.
Getting impartial help: speaking to a regulated specialist
The right choice among these company insolvency options comes down to your specific numbers, your creditors and what you want to protect. A licensed insolvency practitioner or solicitor can look at your situation and set out the realistic routes, including where current creditor petitions are advertised in The Gazette's insolvency notices.
This article is general information and not legal, financial or insolvency advice. Every company's position is different, and you should speak to a regulated specialist about your own circumstances before deciding anything.
If you would like to talk it through, Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor who can advise on your options — start an enquiry. Harbourfirst is an introducer; it does not give advice or act for you itself.