31 March 2026

Insolvency rarely arrives overnight. The businesses that come through it best are the ones whose directors recognised the warning signs early and got advice while they still had options. Leaving it too late narrows those options and increases personal risk.

A business owner reviewing financial statements at a desk
The earlier you act on financial distress, the more options remain open.

Warning signs to watch

Persistent cash-flow pressure, paying suppliers late, relying on the tax office as a lender, defaulting on loans, and an inability to obtain finance are all signals worth taking seriously. Insolvency, in simple terms, means being unable to pay your debts as and when they fall due.

Options for a distressed company

Depending on the situation, options can include informal restructuring and refinancing, a formal restructuring process, voluntary administration, or — for genuinely viable small businesses — the small business restructuring pathway. Each has different consequences for the company, its directors, and its creditors.

  • Informal workout or refinancing
  • Small business restructuring (for eligible companies)
  • Voluntary administration
  • Liquidation, where the business can't be saved

Protecting yourself as a director

Directors who keep trading while insolvent can become personally liable for the debts incurred. Getting professional advice early is not an admission of failure — it's the single most effective step you can take to protect both the business and yourself.

This article is general information only and is not legal advice. Laws change and every situation is different — please contact KD Legal for advice tailored to your circumstances.

Back to all perspectives