Typical situations
- The board is unsure whether it is still appropriate to continue trading.
- Personal guarantees have been given to lenders, landlords or suppliers.
- A director's loan account is overdrawn and the company may not be able to repay it.
- There is concern about wrongful trading or the way recent payments have been made.
Director duties change as solvency changes
When a company is solvent, directors primarily owe duties to the company. When insolvency is likely, the interests of creditors become much more important. That shift is practical as well as legal: it should affect which payments are made, which contracts are taken on, and how quickly the board seeks advice.
Our guide to director duties in financial difficulty sets out the issues in more detail.
Personal guarantees and loan accounts
A company process does not automatically release a personal guarantee. Lenders, invoice funders, landlords and some suppliers may still look to the individual. That exposure should be identified before a turnaround or insolvency route is chosen.
Overdrawn directors' loan accounts are treated as an asset of the company. In an insolvency they can be called in. They need to be part of the same conversation as cash flow and closure options.
Advice should be confidential and specific
Directors are often dealing with employees, family shareholders and funders at the same time. The first conversation should be confidential, factual and focused on options rather than on a single product.
Construction directors should also read our construction director support page, which covers plant finance guarantees, labour models and the way personal exposure typically arises in contracting businesses.
Common questions
When should directors take advice?
As soon as there is a real question about whether debts can be paid on time, or whether continued trading might worsen the position for creditors. Early advice widens the options. It does not commit the company to a process.
Does Turnwell act as a licensed insolvency practitioner?
Turnwell provides advisory support. Where a formal insolvency appointment is required, that work is carried out by a licensed insolvency practitioner. We help directors understand whether that step is needed and prepare for it.
Related services
Business turnaround
Stabilise trading, restore control and build a practical plan around the parts of the business that remain viable.
Liquidation and closure
Understand Creditors' Voluntary Liquidation and the other closure options when a company cannot continue.
Creditor pressure
Respond to supplier action, statutory demands and winding-up petitions with a plan rather than a series of short-term holds.
HMRC debt
Address VAT, PAYE and corporation tax arrears, including Time to Pay and the risk of HMRC enforcement.
Related insights
Director duties when a company is in financial difficulty
A clear explanation of how UK director duties shift as a company approaches insolvency, including creditor interests, continued trading and record-keeping.
Personal guarantees when a business is under pressure
What UK directors should understand about personal guarantees if their company is facing cash pressure, restructuring or insolvency.
