{"id":2116416,"date":"2026-10-22T07:31:46","date_gmt":"2026-10-22T06:31:46","guid":{"rendered":"https:\/\/www.thebusinessdesk.com\/eastmidlands\/news\/2116416-how-to-pull-a-business-back-from-the-brink-of-collapse"},"modified":"2026-10-22T07:35:41","modified_gmt":"2026-10-22T06:35:41","slug":"how-to-pull-a-business-back-from-the-brink-of-collapse","status":"publish","type":"post","link":"https:\/\/www.thebusinessdesk.com\/eastmidlands\/news\/2116416-how-to-pull-a-business-back-from-the-brink-of-collapse","title":{"rendered":"How to pull a business back from the brink of collapse"},"content":{"rendered":"<p>The difference between a going concern and a company collapse is less than many directors are willing to admit.<\/p>\n<p>So given the frequently-cited &#8216;challenging conditions&#8217; in various sectors at the moment, we&#8217;ve asked several insolvency practitioners about which warning signs should really be heeded, why early intervention can be crucial, and the key legal details of being able to bring a business back from the brink.<\/p>\n<p>First things first, what actually constitutes that line between alive and dead, for lawyers and restructuring professionals?<\/p>\n<p>Callum Carmichael, restructuring advisory partner at FRP, said that there are two legal definitions of insolvency: balance sheet insolvency &#8211; where liabilities exceed assets on the balance sheet &#8211; and cash flow insolvency &#8211; where a company is unable to pay its debts as and when they fall due; and at which point creditors or suppliers can petition the court to appoint a liquidator.<\/p>\n<p>The reality, of course, is much more nuanced.<\/p>\n<p>&#8220;Many companies will find themselves within the &#8216;zone of insolvency&#8217;, where they may not be technically insolvent yet, but they\u2019re in genuine financial distress,&#8221; he explained. &#8220;For example, that might happen after an anticipated new contract suddenly falls away, leaving no way to bridge the gap, or where a new round of funding is imminent, but the cashflow position is becoming critical.&#8221;<\/p>\n<div id=\"attachment_2116421\" style=\"width: 310px\" class=\"wp-caption alignleft\"><img decoding=\"async\" aria-describedby=\"caption-attachment-2116421\" class=\"size-medium wp-image-2116421\" src=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/nicola-ross048-e1792056772149-300x200.jpg\" alt=\"Nicola Ross, a partner in MFMac\u2019s litigation and dispute resolution team\" width=\"300\" height=\"200\" srcset=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/nicola-ross048-e1792056772149-300x200.jpg 300w, https:\/\/www.thebusinessdesk.com\/_files\/images\/nicola-ross048-e1792056772149-200x134.jpg 200w, https:\/\/www.thebusinessdesk.com\/_files\/images\/nicola-ross048-e1792056772149.jpg 500w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><p id=\"caption-attachment-2116421\" class=\"wp-caption-text\"><strong>Nicola Ross, a partner in MFMac\u2019s litigation and dispute resolution team<\/strong><\/p><\/div>\n<p>Nicola Ross, partner in the litigation and dispute resolution team at Morton Fraser MacRoberts, said that the usual signs to look out for are issues with cash flow, creditor\/supplier pressure and not being able to pay debts as they fall due.\u00a0Debts with HM Revenue and Customs are often an important indicator, because businesses often treat the taxman as the last creditor to be paid, with things like PAYE and VAT arrears piling up.<\/p>\n<p>A common misconception is that the legal risk for directors begins only when a company is formally insolvent. In reality, that&#8217;s not the case, according to Ross. &#8220;The key legal shift is that directors can no longer focus solely on shareholder value \u2013 once insolvency is probable, they must give proper regard to the interests of creditors, who may ultimately become the stakeholders most affected by board decisions.&#8221;<\/p>\n<p>The greatest personal exposure for directors comes through wrongful trading, breach of duty or misfeasance claims. Once a company enters the danger zone, directors need more than good intentions \u2013 they need evidence of careful governance, open discussion, proper regard to creditors and decisions that can withstand scrutiny long after the event.<\/p>\n<p>&#8220;Courts are increasingly concerned with whether directors recognised the company&#8217;s financial reality, properly considered creditor interests when required, and followed a transparent and defensible decision-making process,&#8221; said Ross.<\/p>\n<p>&#8220;The legal risk starts well before liquidation or administration appears on the horizon \u2013 when warnings such as declining liquidity, covenant pressure and creditor demands begin to accumulate then robust governance, careful documentation and early professional advice become not just good business practice, but essential legal protection for directors.&#8221;<\/p>\n<p>George Dale, partner at Opus Restructuring and Insolvency, said that in his experience, the &#8216;point of no return&#8217; is reached when directors have run out of viable options and the business no longer has sufficient cash, creditor support, or stakeholder confidence to trade its way back to stability. &#8220;Businesses rarely fail because of one catastrophic event, it is usually the accumulation of a number of smaller issues that, left unaddressed, eventually become overwhelming,&#8221; he noted.<\/p>\n<p>Once directors know, or ought reasonably to know, that insolvency is unavoidable, their duties begin to shift away from shareholders and increasingly towards protecting the interests of creditors.<\/p>\n<p>&#8220;What often turns a difficult situation into an irreversible one is delay,&#8221; explained Dale. &#8220;By the time HMRC arrears have escalated, creditor pressure has intensified, suppliers are demanding payment up front, and cash reserves are exhausted, the range of available options can be significantly reduced.&#8221;<\/p>\n<div id=\"attachment_2116420\" style=\"width: 310px\" class=\"wp-caption alignright\"><img decoding=\"async\" aria-describedby=\"caption-attachment-2116420\" class=\"size-medium wp-image-2116420\" src=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/1679859016743-e1792056843903-300x200.jpg\" alt=\"George Dale, a partner at Opus\" width=\"300\" height=\"200\" srcset=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/1679859016743-e1792056843903-300x200.jpg 300w, https:\/\/www.thebusinessdesk.com\/_files\/images\/1679859016743-e1792056843903-200x134.jpg 200w, https:\/\/www.thebusinessdesk.com\/_files\/images\/1679859016743-e1792056843903.jpg 400w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><p id=\"caption-attachment-2116420\" class=\"wp-caption-text\"><strong>George Dale, a partner at Opus<\/strong><\/p><\/div>\n<p>Whether or not a business can be saved depends on a multitude of factors, including the ability and attitude of the directors, the willingness of suppliers and creditors to support the company and whether or not the difficulties are temporary.<\/p>\n<p>&#8220;Often, the most critical consideration is whether or not there is still a fundamentally viable business underneath the financial distress,&#8221; said Ross. &#8220;A business can be saved in its current form where it has a cash flow problem, but it is much harder to save where it has a fundamental business model problem.<\/p>\n<p>&#8220;A company that loses money on every sale, has shrinking demand and no route back to profitability, will usually only delay the inevitable by injecting more funding.&#8221;<\/p>\n<p>The key question is usually whether the company can realistically trade its way out of difficulty within the next six to 12 months. If the answer is yes, a rescue may be achievable. If the answer is no, and survival depends on something speculative such as winning a large contract, successful litigation, or an investor who has not yet committed funds, the risk of formal insolvency becomes much more acute.<\/p>\n<p>Directors need to take ownership of the situation, seek professional advice, be prepared to take tough decisions and have a credible plan to turn things around. Such a plan inevitably involves cutting costs, but also preparing honest cashflow statements, which identify &#8211; well in advance &#8211; when a crunch point is coming, in order to give time to take appropriate action.<\/p>\n<p>Improving working capital through actions like more aggressive and proactive credit control, shortening customers&#8217; credit terms while extending payment terms with suppliers, tighter control of stock and consideration of fresh funding options &#8211; say by existing investors, new investors or perhaps even considering some form of invoice finance might help &#8211; and engaging with creditors are all key steps.<\/p>\n<p>&#8220;Creditors generally dislike surprises more than they dislike late payment, so a business is more likely to obtain support if it approaches creditors before defaults occur, with a clear proposal and with realistic timescales &#8211; once creditors start enforcement proceedings, available options narrow considerably,&#8221; Ross added. &#8220;Sometimes a business is asset-rich but cash-poor, so selling assets, like excess stock or even surplus property, non-core subsidiaries or unused machinery, can provide breathing space while a broader turnaround plan is implemented.&#8221;<\/p>\n<p>Dale reiterated that early intervention is almost always the single biggest factor in determining whether a business can be rescued.<\/p>\n<p>&#8220;When directors seek advice at an early stage, we can explore a wide range of restructuring options: including improving cash flow management, negotiating time-to-pay arrangements with HMRC, refinancing existing debt, securing new investment, reducing costs, restructuring operations, renegotiating contracts, or seeking support from key creditors and stakeholders.<\/p>\n<p>&#8220;Where creditor pressure is more advanced, formal procedures such as a company voluntary arrangement (CVA), pre-pack administration, or a restructuring plan &#8211; typically for larger companies, but a developing area for SME\u2019s due to cost &#8211; may provide breathing space and facilitate a recovery,&#8221; Dale added.<\/p>\n<p>Crucially, directors should not view seeking advice as admitting defeat.<\/p>\n<p>Dale stated that obtaining independent advice is one of the clearest indications that directors are taking their responsibilities seriously, as it demonstrates that they are actively considering their legal duties, assessing available options and taking appropriate steps to protect creditors and stakeholders. &#8220;The directors who achieve the best outcomes are often not those who avoid problems, but those who recognise them early, seek advice promptly, and take decisive action before the situation becomes unmanageable \u2013 in many cases, that can be the difference between a successful restructuring and a formal insolvency process.&#8221;<\/p>\n<div id=\"attachment_2116417\" style=\"width: 310px\" class=\"wp-caption alignleft\"><img decoding=\"async\" aria-describedby=\"caption-attachment-2116417\" class=\"size-medium wp-image-2116417\" src=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/1792055716111-e1792585531667-300x200.jpg\" alt=\"Nicola Clark, insolvency partner at MHA\" width=\"300\" height=\"200\" srcset=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/1792055716111-e1792585531667-300x200.jpg 300w, https:\/\/www.thebusinessdesk.com\/_files\/images\/1792055716111-e1792585531667-200x134.jpg 200w, https:\/\/www.thebusinessdesk.com\/_files\/images\/1792055716111-e1792585531667.jpg 400w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><p id=\"caption-attachment-2116417\" class=\"wp-caption-text\"><strong>Nicola Clark, insolvency partner at MHA<\/strong><\/p><\/div>\n<p>Nicola Clark, insolvency partner at MHA, agreed that directors should not wait for a winding-up petition, a frozen bank account or a missed payroll before seeking advice &#8211; as at that stage, the problem is no longer only financial &#8211; it is also about lost time, lost confidence and reduced control.<\/p>\n<p>&#8220;Directors are often concerned that speaking to an insolvency or restructuring adviser will set an irreversible process in motion &#8211; it does not &#8211; an initial consultation is intended to establish the facts, understand the risks and assess the available options.<\/p>\n<p>&#8220;Seeking advice is not an admission of failure,&#8221; she continued. &#8220;It is often the first practical step towards protecting the business, its employees and its creditors, while giving directors greater control over the decisions ahead of them.<\/p>\n<p>&#8220;Early advice can help directors determine which stakeholders to approach, what information to provide, and which restructuring proposals are realistically deliverable.&#8221;<\/p>\n<p>Clark argued that the best approach is not always to preserve the existing company at all costs.<\/p>\n<p>&#8220;Sometimes the best achievable outcome is to preserve the underlying business, jobs, customer relationships and productive assets through a sale or restructuring \u2013 early intervention may allow time to secure additional working capital, negotiate revised payment terms with lenders, landlords, suppliers and HMRC, dispose of surplus assets, introduce new investment, renegotiate contracts or implement an operational turnaround.<\/p>\n<p>&#8220;Informal negotiations are often most effective while the company is still complying with agreed arrangements and can approach creditors with credible forecasts, a clear proposal and something meaningful to offer in return,&#8221; she added, noting that formal rescue tools may include a CVA, moratorium, administration or a Part 26A restructuring plan.<\/p>\n<p>Clark pointed out that transparency does not mean circulating untested information or negotiating without professional advice.<\/p>\n<p>&#8220;Communications should be controlled, accurate and consistent, particularly where there are secured lenders, material tax arrears, legal proceedings or a risk of customers and suppliers withdrawing support,&#8221; she stated. &#8220;The present market makes this particularly important &#8211; we are seeing increasingly varied creditor behaviour &#8211; mainstream lenders may show forbearance, while alternative lenders can enforce more rapidly and HMRC has adopted a firmer approach in several distressed situations.&#8221;<\/p>\n<div id=\"attachment_1052\" style=\"width: 310px\" class=\"wp-caption alignright\"><img decoding=\"async\" aria-describedby=\"caption-attachment-1052\" class=\"size-medium wp-image-1052\" src=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/jan_26\/Callum-Carmichael-e1767605375904-300x182.jpg\" alt=\"Callum Carmichael, restructuring advisory director at FRP in Edinburgh\" width=\"300\" height=\"182\" \/><p id=\"caption-attachment-1052\" class=\"wp-caption-text\"><strong>Callum Carmichael, restructuring advisory director at FRP<\/strong><\/p><\/div>\n<p>Carmichael agreed that it&#8217;s important to be strategic about who knows what and when.<\/p>\n<p>&#8220;The more parties who know about financial difficulty, the more rumours can circulate, and rumours create real damage &#8211; trade suppliers might stop supplying, for example, or key staff might start looking for other opportunities out of nervousness &#8211; so while you do need to engage with certain parties, you should keep that circle as tight and controlled as possible,&#8221; he stated.<\/p>\n<p>&#8220;The parties to engage with early are the ones whose cooperation directly affects the company\u2019s ability to continue trading \u2013 early conversations with secured\u00a0lenders, landlords and critical suppliers can unlock real solutions.<\/p>\n<p>&#8220;A bank might reschedule your loan, or an asset-based lender might extend a finance agreement to help reduce monthly payments and free up cash,&#8221; Carmichael added. &#8220;The fundamental principle is that, as long as creditors\u2019 positions are preserved &#8211; meaning they\u2019re no worse off than they\u2019d otherwise be &#8211; you can continue operating while working towards recovery.&#8221;<\/p>\n<p>Sonia Jordan, president of insolvency industry body R3, concluded: &#8220;Seeking advice from a turnaround, restructuring or insolvency professional is a proactive step that gives business owners more time to understand their options and make considered decisions.<\/p>\n<p>&#8220;The earlier those conversations take place, the greater the opportunity to find a way forward and, where possible, rescue a business.&#8221;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>We spoke to insolvency practitioners to find out legally where the point of no return is &#8211; and why directors should be more forthcoming with potential problems<\/p>\n","protected":false},"author":278857,"featured_media":2116419,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[137137,120667],"coauthors":[137126],"class_list":["post-2116416","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-smes","tag-featured-story","tag-national"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to pull a business back from the brink of collapse | TheBusinessDesk.com<\/title>\n<meta name=\"description\" content=\"We spoke to insolvency practitioners to find out legally where the point of no return is - and why directors should be more forthcoming with potential problems.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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