Company restructuring is the process of reorganising a business’ finances, operations or structure to improve its stability — or, where recovery isn’t possible, to close it in an orderly way.
When cash flow is tight, debts are growing or creditors are threatening action, restructuring gives directors a framework to deal with problems head-on instead of letting them spiral into insolvency.
It’s not always about saving a failing business at any cost. Sometimes, restructuring means reducing debt, selling part of the company, or placing it into a managed process that protects creditors and directors alike.
When to consider restructuring
Most UK directors start looking at restructuring when early signs of insolvency appear, such as unpaid taxes, late supplier payments or reliance on short-term borrowing. These are red flags that the company may already be unable to pay its debts in full and on time.
At this point, acting early is vital. A well-planned restructuring could:
- Protect the business from creditor pressure through legal moratoriums
- Preserve jobs and contracts by keeping viable parts of the company trading
- Reduce or write off debt through formal agreements with creditors
- Limit personal risk by showing you’ve acted responsibly once insolvency was apparent
Ignoring the warning signs can lead to wrongful trading or even director’s disqualification later on, so early advice is key.
Financial restructuring: tackling debt and cash flow
The first step in any restructuring is usually financial. The aim is to make the company’s balance sheet and day-to-day cash flow sustainable. This might include:
- Renegotiating creditor terms – agreeing reduced payments or extended deadlines with suppliers or landlords.
- Consolidating loans or refinancing – replacing expensive borrowing with more affordable finance.
- Restructuring tax arrears – negotiating a Time to Pay arrangement with HMRC to spread overdue VAT, PAYE or Corporation Tax.
- Reducing costs – trimming non-essential spending, overheads or surplus assets to free up working capital.
If the company is fundamentally viable, financial restructuring alone may be enough to restore stability. If not, a formal insolvency process could provide the structure needed to protect the business.
Formal restructuring options under UK insolvency law
When a business is insolvent or close to it, certain legal processes allow directors to restructure safely under the guidance of a licensed insolvency practitioner.
1. Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement is a legally binding agreement with creditors to repay debts in affordable instalments, often over three to five years.
- Directors stay in control of day-to-day operations.
- Included creditors agree to freeze interest and halt legal action.
- Unmanageable debts can be written off at the end of the term.
CVAs work best for companies with consistent revenue but unsustainable debt levels. They give time to trade through problems and could avoid liquidation altogether.
2. Administration
Administration places the company under the protection of a statutory moratorium, preventing creditors from enforcing debts or filing a winding-up petition with the court. A licensed insolvency practitioner becomes administrator and takes temporary control. Their legal duty is to act in creditors’ best interests, usually by:
- Rescuing the company as a going concern, or
- Selling the business or its assets to achieve a better return than liquidation.
In many cases, parts of the business are sold, sometimes in a pre-pack administration, allowing jobs, contracts and goodwill to transfer to a new entity while the old company is wound down properly.
3. Informal restructuring or turnaround
Not all restructuring needs a formal procedure. For smaller companies with manageable debt, an informal turnaround can work. This might include:
- Negotiating directly with key creditors
- Securing short-term investment
- Releasing underused assets
- Making management or operational changes
While informal approaches are quicker and less public, they rely on creditor cooperation and don’t provide the same formal protection as a CVA or Administration.
Liquidation as part of restructuring
Sometimes, restructuring means accepting that the business can’t continue and focusing on closing it properly.
Through a Creditors’ Voluntary Liquidation (CVL), directors make the responsible choice to wind up the company, sell any assets and use the proceeds to repay creditors as far as possible.
Once liquidation is complete, most remaining debts are written off. This draws a clear line under the company’s financial history and allows directors to move forward without personal liability, provided they’ve acted within their duties.
Even closure can be a form of restructuring: it reorganises debt and risk so you can start again on solid ground.
Your duties during a restructure
The moment you suspect insolvency, your director’s duties shift from shareholders to creditors. That means every decision you make must aim to minimise losses to those creditors. To meet your duties:
- Keep clear financial records and cash-flow forecasts.
- Stop taking credit you know can’t be repaid.
- Seek professional advice before making major payments or asset transfers.
- Avoid favouring one creditor over another.
- Work with a licensed insolvency practitioner early.
Demonstrating that you sought advice and acted reasonably could protect you personally, even if the company cannot be saved.
How an insolvency practitioner supports restructuring
Licensed insolvency practitioners do more than close companies. They assess viability and explain every available option, from informal rescue plans to Administration or CVL. Their role includes:
- Reviewing financial records to confirm solvency or insolvency
- Advising on rescue routes such as CVA or Administration
- Negotiating with creditors and HMRC
- Preparing statutory notices, reports and filings
- Managing asset sales if closure becomes necessary
Working with an insolvency practitioner early gives you time to explore all possible outcomes and stay compliant with your director’s duties.
Key takeaways: what is company restructuring?
- Company restructuring reorganises a business’ finances or structure to manage debt, improve stability or close safely.
- Options include informal negotiation, CVA, Administration or, where recovery isn’t viable, liquidation.
- Each route must prioritise creditor interests once insolvency is suspected.
- Acting early gives you more control, better outcomes and reduced personal risk.
Get advice on company restructuring
If your business is under financial pressure, restructuring could be your route to stability or a structured exit that protects your creditors.
Our licensed insolvency practitioners will assess your company’s position, explain your legal duties and outline every available option, from debt restructuring to liquidation.
Don’t wait for creditor action to force your hand. Get free, confidential advice today and take back control of your company’s future.
