What can you do if your business can’t pay its debts?

If your business is struggling to pay its bills, you're not alone. Cashflow pressures, rising costs, and late payments can quickly escalate, leaving directors unsure of what to do next.

Facing financial difficulty doesn’t mean the end of the road. But it is important to act quickly and take professional advice.

Recognise the warning signs

You may already be feeling the pressure, but here are some signs that your business may be insolvent or approaching insolvency:

• You're unable to pay suppliers, staff, or HMRC on time
• Your liabilities are greater than your assets
• Creditors are threatening legal action
• You’re relying on loans or credit to cover day-to-day costs

If any of this sounds familiar, now is the time to get help.

Understand your responsibilities as a director

If your business is insolvent, your responsibilities as a director shift. Instead of acting in the best interest of shareholders, you must act in the best interest of creditors. This means:

• Avoiding further debts you can’t pay
• Not preferring one creditor over another
• Keeping detailed records of decisions and cashflow

Continuing to trade while insolvent could lead to personal liability if your actions worsen the position for creditors.

Know your options

There are several ways forward, depending on your business’s circumstances:

• Time to Pay arrangement: HMRC may agree to a structured repayment plan.
• Company Voluntary Arrangement (CVA): A legally binding agreement with creditors to repay debts over time.
• Administration: A formal process to protect the business from legal action while exploring rescue or sale options.
• Liquidation: If the business can’t be saved, closing it in a structured way ensures creditors are treated fairly and directors meet their legal duties.

Don’t delay getting advice

The sooner you speak to an insolvency professional, the more options you'll have. In many cases, businesses avoid formal insolvency with the right support. Even if closure is the best route, approaching it early and professionally helps protect your reputation and personal position.

All conversations with licensed insolvency practitioners are confidential. Our role is to advise, not to judge.

Need help?

If your business can’t pay its debts or you’re worried about where things are heading, we’re here to help. Our Insolvency and Recovery team offers clear, confidential advice to directors under pressure.

Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk

Lee Green