A general guide on the different kinds of corporate and personal insolvency processes in the UK.

The four categories of insolvency processes


Sometimes, the company and its creditors come to an agreement about repayment and these processes are therefore called “voluntary” insolvency processes. The insolvency practitioner is still in charge of realising the company’s assets.


Administration and Company Voluntary Arrangements are examples of “rescue” processes, which are capable of allowing for the survival of an insolvent company, or at least the survival of its business as a going concern. An insolvency practitioner is appointed and they are in charge of realising the assets.


In a terminal process, the insolvency practitioner will liquidate or wind-up the company, distribute the assets then dissolve the company at the end of the process.

Other remedies

There are other remedies available to secured creditors. These are not strictly speaking insolvency processes. Secured Creditors can appoint a receiver by making formal demand under its security document. This can include an administrative receiver, which is appointed over all of the assets of the company or a LPA or fixed charge receiver, who is appointed over specified properties. It is not possible to appoint LPA receivers in Scotland.

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If you are experiencing any financial difficulties it is important that you contact your named Relationship Manager or call our business management team on 0345 072 5555 as soon as possible, as well as get independent legal and financial advice.

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Support through financial difficulty

We understand our customers may face a range of different problems but most of these will impact on revenue and short-term cash flow requirements.

Lloyds Bank is committed to helping customers find a way forward if they are experiencing financial difficulty.

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Your responsibility as a director

If you are a director of a company that is insolvent or nearing insolvency, this has important consequences for you. Read our guide on directors' responsibilities to find out more.

Directors' duties
  • Voluntary Liquidation can be either a members voluntary liquidation or a creditors voluntary liquidation. The main difference is that a members voluntary liquidation is a solvent process. The directors have to swear that the creditors will be paid in full within 12 months.

    A CVL is commenced by the members passing a special resolution to the effect that the company cannot, by reason of its liabilities, continue its business and that it is advisable to wind up. This is usually at the directors' request because the company is insolvent and there are no appropriate rescue procedures available. As the company is insolvent, there will be no statutory declaration of solvency by the directors and there must be a meeting of the creditors.

  • An arrangement between a company in financial difficulties and its creditors. It is also available to LLPs (called a “partnership voluntary arrangement”). CVAs are put in place so that the company can either exit or avoid altogether other insolvency processes.

  • An insolvency process for Scottish and English companies. The company is placed under the control of an insolvency practitioner to enable him to recuse the company as a going concern. If this is not possible, the administrator must achieve a better result for creditors than would be the case if the company were put into liquidation. If this is not possible then the administrator realises assets to make a distribution to creditors.

  • Compulsory liquidation (or winding up by the court) is a procedure by which the assets of a company are sold, and the proceeds are distributed to the company's creditors. A court order is required to put a company into compulsory liquidation. At the end of the liquidation, the company is dissolved.

  • Bankruptcy is a process available to individuals in England by which the assets of a debtor are realised and distributed amongst their creditors. All of the debtor’s assets vest in the Trustee in Bankruptcy who then realises what value they have and distributes the proceeds rateably amongst unsecured creditors. Sequestration is the Scottish equivalent of Bankruptcy and is available to Scottish individuals and Scottish ordinary (unincorporated) partnerships. In Scotland, the Trustee in Bankruptcy is called a Trustee in Sequestration.

    Whilst bankrupt, a debtor cannot: (1) be a director or partner of an LLP; (2) get credit of more than £500; (3) practice as a solicitor; (4) act as a trustee of a charity or pension trust. Bankruptcy of one partner may dissolve a partnership.

  • An IVA is an agreement between an individual debtor and his creditors in England and Wales. It allows a debtor to pay a proportion of his debts and come to an arrangement with creditors over payment. In Scotland, this is called a Trust Deed.

    As with IVAs, the effect of a trust deed on a debtor is less severe than with sequestration, so may be the preferred option for professional individuals, such as solicitors.

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This page provides you with a broad overview of Corporate & Personal Insolvency processes in Scotland, England and Wales as at September 2016. It is not designed to constitute legal advice and as such if your business is experiencing financial difficulty it is recommended that you always seek independent legal and financial advice.

For further information about the compensation provided by the FSCS, refer to the FSCS website at You can also visit our Financial Services Compensation Scheme page for more details.

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