Solvent or insolvent?
A company is insolvent the moment it cannot pay its debts as they fall due, or its liabilities exceed its assets. That includes any unpaid creditor — HMRC, suppliers, employees, landlords or lenders — no matter how small the amount.
If your company is fully solvent and can pay everyone in full, follow the DS01 solvent strike-off route instead.
Why You Cannot Just File a DS01
A DS01 strike-off is only legally available where the company has no creditors. Filing one while debts are outstanding allows any creditor to object and have the strike-off blocked or reversed.
Directors who try to dissolve an insolvent company can face misconduct findings, disqualification, and personal liability. The right route protects you and gives creditors a fair process.
Directors' Duties Change Immediately
The moment a company becomes insolvent, directors' duties shift from acting in the interests of shareholders to acting in the interests of creditors. Continuing to trade, taking new credit, or paying some creditors ahead of others can amount to wrongful trading or preference.
The single most important step is to stop, take advice, and document every decision from that point on.
Your Main Options
Creditors' Voluntary Liquidation (CVL)
The most common route. Directors and shareholders accept the company cannot continue and voluntarily appoint a licensed insolvency practitioner as liquidator. The liquidator sells the company's assets, pays creditors in the statutory order and closes the company.
Company Administration
An administrator takes control to rescue the company, achieve a better outcome for creditors than liquidation, or realise property to pay secured creditors. Often used where the business itself still has value even if the company does not.
Company Voluntary Arrangement (CVA)
A legally binding deal with creditors to pay back debts over a period of time, usually while the company keeps trading. Requires creditor approval and supervision by an insolvency practitioner.
Compulsory Liquidation
Triggered by a creditor presenting a winding-up petition to court. The court appoints the Official Receiver, and directors lose all control. Almost always worse for directors than acting first with a CVL.
Appointing a Licensed Insolvency Practitioner
All formal insolvency procedures must be run by a licensed insolvency practitioner (IP). Accountants — including us — are not licensed to act as liquidators, but we work alongside trusted IPs and can introduce you to the right firm for your situation.
A typical CVL appointment looks like this:
- Initial confidential consultation with an IP to confirm insolvency and review options.
- Board meeting resolves the company is insolvent and convenes shareholder and creditor decisions.
- Shareholders pass a winding-up resolution; creditors are invited to nominate the liquidator.
- The IP is formally appointed and takes control of the company's affairs.
- Assets are realised, claims agreed, distributions made, and the company dissolved.
Where Directors Can Become Personally Liable
- Personally guaranteed loans, bounce-back loans treated improperly, leases or supplier accounts.
- Overdrawn director's loan accounts — the liquidator will pursue repayment.
- Dividends paid when there were insufficient reserves (unlawful dividends).
- Wrongful trading — continuing to trade when there was no reasonable prospect of avoiding insolvency.
- Fraudulent trading or preferring one creditor over another in the run-up to insolvency.
Free: 2026/27 Tax Deadline Calendar
Every key HMRC date for the tax year — self-assessment, corporation tax, VAT, payroll, and more. Sent straight to your inbox as a PDF.
No spam. Unsubscribe anytime.
Related Articles
Common Questions
When is a company insolvent?
A company is insolvent if it cannot pay its debts as they fall due, or if its liabilities are greater than its assets. Even a single small unpaid debt that cannot be settled makes the company insolvent.
Can I just file a DS01 if the company owes a little money?
No. A DS01 strike-off is only valid for fully solvent companies. Filing one with creditors outstanding can be objected to, reversed, and may expose directors to personal liability and misconduct findings.
What does a liquidator do?
A licensed insolvency practitioner takes control of the company, realises its assets, investigates director conduct, and distributes whatever is recovered to creditors in the statutory order of priority.
What is the difference between CVL and compulsory liquidation?
A Creditors' Voluntary Liquidation (CVL) is started by the directors and shareholders when they accept the company cannot continue. Compulsory liquidation is started by a creditor through the courts, typically following a winding-up petition.
Could I be made personally liable?
Yes — for personally guaranteed debts, overdrawn director's loan accounts, unlawful dividends, or where conduct amounts to wrongful or fraudulent trading. Getting advice early reduces this risk.