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Insolvency during COVID-19

Our guide addresses the changes to Insolvency Law and what are the best steps to consider for your business if you are experiencing cash-flow difficulties.

This page was updated on 10 November 2020. 

Take professional advice early. Speak to creditors and Insolvency practitioners as the earlier you address your cash-flow difficulties, the more options you have

Businesses have worked extremely hard to navigate a difficult and ever-changing environment. With new national restrictions adding to financial pressures, some businesses may have to review the options concerning redundancies, restructuring or insolvency.

Some key issues businesses are experiencing include forecasting cash flows, managing cash, managing creditors, and an increase in debt on the balance sheet that needs to be serviced. This may be debt in relation to HMRC, landlords, creditors, and loans.

As our partners recommend:

"Take professional advice early. Speak to creditors and Insolvency practitioners as the earlier you address your cash-flow difficulties, the more options you have"

David Fleming, Managing Director, Duff and Phelps.


What you need to know about the Government changes to Insolvency law

In June 2020, the Government made changes to Insolvency law. These include temporary and permanent measures.

Temporary Measures (* have been extended):

  • Companies with obligations to hold annual general meetings can continue to have the flexibility to hold these meetings virtually until 30 December 2020.
  • Statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from aggressive creditors as a result of Covid-19 related debts.
  • Termination clauses are still prohibited, this stops suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can to protect their business if necessary.
  • A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. The modifications to the new moratorium procedure, which relax the entry requirements to it, will also be extended until 30 March 2021. Measures will also ease access for companies subject to a winding up petition; also to be extended to 30 March 2021.

 Permanent measures:

  • Introduction of a new “Moratorium” process.
  • Giving companies breathing space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure.
  • Prohibition on enforcement of termination clauses in supply contracts. This enables companies to continue trading during the moratorium.
  • Introduction of a new “Restructuring Plan” process, binding creditors to that plan.

The moratorium is intended to give a company in financial difficulty a time period during which creditors will be unable to enforce debts, so that it can avoid going out of business immediately, and action can be taken to secure its long-term survival. The restructuring plan provides an opportunity for financially-distressed companies to work with creditors to restructure their debts.

Finally, companies are supported through a rescue process by the introduction of new rules to prevent suppliers terminating contracts solely by virtue of a company entering an insolvency process. Further details on the law changes can be found here.


Steps to take

One of the main things to do is continue forecasting cash- flow on a weekly basis, you can find our guide on managing cash-flow here.

13-week cash flow forecast

According to Beverley Budsworth, Managing Director, The Debt Advisor:

"A cash flow forecast covering a 13-week period (a financial quarter) is your map for safely navigating through the next few months. It will help you plan and be proactive about your financials rather than reactive.

It’s vital you forecast in weeks to accurately plot your cash movement. If you just look at monthly totals, you cannot see the timings of your cash movements which could land you in trouble."

As a second step, if forecasts show you can no longer meet liabilities and need further support, speak to a Restructuring and Insolvency practitioner. Take professional advice early and get help.


A Restructuring Plan is a compromise or arrangement with a company’s creditors and is an option for companies which are encountering financial difficulties or may do in the future. The company doesn’t have to be insolvent to propose a plan. A Restructuring Plan can be proposed by the company, any of its creditors, or any of its shareholders.

David Fleming from Duff and Phelps outlines the general procedure:

  • Application to Court to convene hearing
  • Notice of stakeholder meetings and explanatory statement
  • Stakeholders vote
  • Sanction hearing, at which Court may sanction the plan

Insolvency & CVA

Insolvent means that the company is either unlikely or will become unlikely to settle its debts as and when they fall due; or that the company’s debts exceed its assets. If your limited company is insolvent, it can use a Company Voluntary Arrangement (CVA) to pay creditors over a fixed period. If creditors agree, your limited company can continue trading.


If your company is going through the Insolvency process, you can find our guide to managing redundancies here. Furthermore, it is possible to get financial assistance from The Insolvency Service from the Government towards the costs of making staff redundant, but this will have to be paid back.

If your company needs to consider a formal insolvency procedure as part of the reconstruction, the Redundancy Payments Service will cover employees’ claims as long as the company properly operated payroll for its staff which is either PAYE or the CIS scheme.


Support available

Navigating the current financial landscape can be challenging. If you are based in Greater Manchester or Lancashire and need bespoke financial support, our Access to Finance team is here to offer free and impartial guidance. Get in touch on: 0161 237 4128 or email us at The team can also connect you to our Restructuring and Insolvency partners for guidance.

Contact the Access to Finance team

More information is available on the UK Government’s Coronavirus Business Support website. For more personalised advice call us on: 0161 237 4128 or email us at: 


The information provided is meant as a general guide only rather than advice or assurance. GC Business Growth Hub does not guarantee the accuracy or completeness of this information and professional guidance should be sought on all aspects of business planning and responses to the coronavirus. Use of this guide and toolkit are entirely at the risk of the user. Any hyperlinks from this document are to external resources not connected to the GC Business Growth Hub and The Growth Company is not responsible for the content within any hyperlinked site. 

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