When it comes to business rescue, any insolvency professional will be able to relay a number of cases where they could have made a difference, if only they’d been called in sooner. The inescapable reality is that once problems are allowed to take hold in a business, if remedial action is delayed, the positive options gradually melt away and the outcome becomes steadily less palatable. The longer management wait before identifying that they have issues that cannot be solved by the in-house team, seeking independent advice and taking action, the greater the chance that the business and its jobs will be destroyed, with all the stakeholders ending up empty handed.
Initially, the process of deterioration lies ahead once a business starts to encounter financial and commercial problems. Whilst it may seem gradual, the delay simply accelerates the downward slide, until it becomes inexorable and precipitate. Whilst we looked at the link between business decline and the rescue options available more than two years ago, the challenges faced by the business community have not reduced, in fact, quite the reverse.
Increasing creditor enforcement
The pandemic was a period of creditor indulgence, driven mainly by government restrictions on enforcement action but also by a commendable policy of leniency by some major stakeholders, notably HMRC. That has all changed now, with clear indications that creditor patience is wearing thin. This year, there has been rising creditor pressure, more Compulsory Liquidations and a significant increase in Winding Up Petitions issues by HMRC against delinquent corporate taxpayers.
The benefit of early action
Early action can save all or part of the business and preserve jobs, which from a responsible stewardship point of view is what any Directors will want to achieve. There is a clear fiduciary duty to switch their focus from running their company for the benefit of its shareholders to prioritising instead the interests of its creditors. This change is triggered by the possibility of insolvency. At the point of decline, when they know or ought to conclude that an insolvent liquidation is unavoidable, Directors must take all possible steps to minimise creditor losses or run the risk of a range of personal sanctions, most notably prosecution for Wrongful Trading. It is important to recognise that not protecting the position of creditors and worsening their outcomes also plays a role in the Disqualification of Directors.
The result of delay
In the twelve months to August 2025, just 7% (1,804) of business insolvencies went down the business rescue route through a Company Voluntary Arrangement (CVA) or an Administration. The remaining 93% (23,619) were liquidations, either as Creditors’ Voluntary Liquidations (CVLs) or Compulsory Liquidations. Only in a very small number of these liquidations will any part of the business or any of the jobs have survived.
Not every troubled business can be turned round or saved, but it’s a reasonable assumption that more would have been if the Directors had taken prompt and decisive action early enough. Liquidation is a heavy blow for Directors, but for creditors it is a total financial disaster. The Insolvency Service published a wide ranging and exceptionally detailed analysis of the outcome of 2,717 recent CVLs in December 2024. Among its findings were two key statistics:
- In 86% of the CVLs, there was no recovery for any class of creditor.
- The average creditor recovery across all CVLs was 0% of their debt.
Letting a business slither to the bottom of business decline and end up in Liquidation more or less always guarantees that its creditors will lose all their money.
Addressing business problems whilst also managing the day-to-day aspect of the company can be overwhelming, but spotting them and appreciating the scale of issues is the first step towards solving them. Not every company has all the skills in-house to quickly trouble shoot or crisis manage, so seeking independent, specialist advice and support is usually a positive move. Good advice from properly-briefed professionals should be seen as a net benefit, not just a cost.
There is a direct relationship between the speed and timing of action and the quality of the eventual outcome for all of the stakeholders and at Opus, we have extensive experience assisting business owners and directors with concerns and challenges. We will always work with you to find the best solution for you and your business. If you would like to speak to Opus, one of our Partners would be more than happy to have a non-obligatory, confidential chat with you. We can be contacted at rescue@opusllp.com or call us on 0203 995 6380 and we will arrange for a call with one of our specialists.