A guide to contentious insolvency and disputes

Contents:

1. 1. What is contentious insolvency?
   2. Common insolvency disputes
   3. How to resolve an insolvency dispute
   4. The contentious insolvency process
   5. Advice for directors
   6. Advice for creditors
   7. How insolvency disputes are investigated
   8. Office-holders and information-gathering powers
   9. Contentious insolvency FAQs
   10. Our services and solicitors
   11. Recent contentious insolvency cases
   12. Insolvency resources
   13. Further advice and guidance
   14. About the author

What is contentious insolvency?

Contentious insolvency refers to the disputes and legal challenges that arise during the process of personal or corporate insolvency.

While insolvency itself is the financial state of being unable to pay debts when they fall due, contentious insolvency focuses on the conflicts that occur between the parties involved – such as creditors, debtors, insolvency practitioners, directors, or shareholders. Such matters are very wide-ranging depending on the circumstances but, in broad terms, relate to office holders seeking to recover the maximum amount for creditors of an insolvent individual or corporate entity. 

Typically, where a suitable resolution cannot be reached, the principal method of resolution of contentious insolvency matters is litigation. Accordingly, it is usual for disputes to carry the threat of formal legal proceedings at the outset. For this reason, contentious insolvency can be a stressful and complex process for potential defendants, often coinciding with a period of financial difficulty.

Many of the potential claims are highly fact-specific, both contemporaneously and in respect of the insolvency event itself, meaning that robust legal analysis and strategy is essential to getting the best possible outcome.  

Common insolvency disputes

Contentious insolvency covers a wide range of disputes, but some scenarios arise more often than others. Understanding the potential claims which may arise in the event of insolvency at an early stage, and seeking appropriate support or advice accordingly, can be pivotal to the question or extent of liability.  

Pre-insolvency disputes:

Many disputes between creditors and debtors take place, at least initially, before the relevant entity enters into legal insolvency (though it may well be technically insolvent). The likelihood of this occurring is an important consideration for any commercial dispute given it will have a substantial impact on an entity’s ability to pay, separate from the question of liability. Creditors meanwhile will need proactive advice on the implications of the options available to them, including the instigation of insolvency action. From a debtor’s perspective, insolvency often acts as a backstop to obtain an acceptable and affordable outcome, which is ultimately better for the creditor than placing an entity into insolvency. 

Claims against directors:

When an entity has formally entered an insolvency situation, office holders will typically consider a range of potential claims against the directors of the insolvent entity, on the basis that they can be held to be personally liable in a range of circumstances. By definition, the insolvent entity is unable to repay creditors and therefore claims of this nature are a major tool for office holders to realise further amounts for creditors. 

Misfeasance claims:

Directors are legally required to consider the interests of creditors from the point that they consider insolvency to be a reasonably foreseeable prospect. Failure to do so, and evidence the same, can give rise to potential claims for misfeasance by office holders. 

Directors should always be clear about what their statutory duties are linked with their formal role, which can be decisive in avoiding claims of this nature. If directors are subject to claims of this nature, taking legal advice on their position is a sensible first step. 

Wrongful and fraudulent trading:

Where directors continue trading when they knew (or ought to have known) that the business had no realistic prospect of avoiding insolvency, they can be pursued for wrongful trading. Fraudulent trading claims arise where there was an intention to defraud creditors, which can also carry serious personal and criminal consequences.

Transactions at undervalue and preferences:

In the period leading up to insolvency, certain transactions can be scrutinised. If assets were sold for less than their true value, or if one creditor was unfairly “preferred” over others (for example, being repaid in priority), those transactions can be challenged and potentially reversed.

Disputes over creditor claims:

Creditors may challenge the validity, value, or priority of another creditor’s claim in an insolvency. These disputes often centre on whether debts are properly documented, whether interest and charges are enforceable, or whether a creditor should rank ahead of others.

Bankruptcy asset disputes:

For individuals, conflicts can arise over what constitutes part of the bankruptcy estate. Common examples include jointly owned property, transfers of assets to family members before bankruptcy, or disclosure concerns with a recent focus on cryptocurrency as an asset which is more difficult to locate or link to a bankrupt.

One of the disputes we see most frequently in contentious insolvency is around director misfeasance. Questions often arise about whether directors have acted properly when a company is in financial distress, and these claims can quickly become complex. Understanding directors’ duties early and seeking advice can make all the difference in preventing issues from escalating.

How to resolve an insolvency dispute

Contentious insolvency can quickly become complex, but many disputes can be managed or resolved without the need for lengthy litigation. The best approach will depend on the nature of the claim, the parties involved, and how far the insolvency has progressed. Common routes to resolution include:

1. Negotiation and dialogue: Often the first step is open and encourages discussion between the parties. This may involve creditors, directors, insolvency practitioners, or shareholders working together to find a practical compromise that avoids unnecessary costs.
2. Mediation or alternative dispute resolution (ADR): Where direct negotiation does not succeed, mediation or ADR can provide a structured but less formal process for resolving disagreements. A neutral third party can help narrow the issues and guide the parties toward a mutually acceptable settlement.
3. Formal court proceedings: In cases where no agreement can be reached, ultimately formal legal proceeding may be necessary to resolve the dispute. Typically, this is in circumstances where there is substantive factual or legal dispute, to the extent that both sides consider that the court will rule in their favour. While legal judgements are binding (subject to appeal) and come with the advantage of being legally enforceable, they come at significant cost to all parties as well as what is known as litigation risk; the chance that the court rules in the other side’s favour even where a party feels they have a strong case.

Taking professional advice:

At every stage, obtaining specialist legal advice can represent a cost and time benefit. A suitably-qualified professional can assess the strength of a claim, outline the available options, and advise on the most cost-effective way forward. Regardless of the nature of your involvement in the dispute, early advice can often prevent disputes from escalating unnecessarily and being proactive can be hugely advantageous.

While a key aspect of taking professional advice is an analysis of a party’s legal position, the value of doing so goes well beyond this in considering all relevant factors with the goal of guiding a matter to the best possible outcome. Understandably, what that looks like will be heavily dependent on the individual circumstances of each client. 

If you are a director, creditor or office holder involved in an insolvency dispute and need advice, get in touch with one of our specialist insolvency solicitors for support, advice and guidance throughout every step of the process.

The advantages of acting early

Taking time to review a company’s financial position and the potential risk of insolvency at an early point offers significant advantages. 

In summary terms, acting early, even if this is simply taking advice on your legal position, will likely mean that there are more options available and a better opportunity to obtain a better outcome. Prevention is typically better than cure and the chance of resolving a problem at an early point may be lost in the event of delay. 

The contentious insolvency process

While the exact process of a contentious insolvency matter will vary depending on the facts of the case, in broad terms such matters can be defined by some key stages:

1. Pre-insolvency

Typically, the factual events of a contentious insolvency matter occur before the individual or entity has actually entered insolvency, either technically or from a legal perspective. It is for this reason that early action is critical, as if issues (or potential issues as they are in real-time) can be identified at this point substantive action can be definitive. 

In very broad terms, if an individual or entity has a concern about insolvency, especially if such a concern is based on financial information, that in itself is enough to justify taking precautionary measures such as taking legal advice.

2. Identification of a dispute

Further to point 1 above, if a debtor, director or individual identifies a potential issue, legal advice should be sought at that point. Outside of this, a potential dispute will begin when an office holder first considers an insolvency event and, in furtherance of the interests of the creditors to the insolvent entity, will conduct a review and identify circumstances which potentially give rise to a legal claim. 

3. Legal advice and assessment

It is typically at this point that an office holder will seek legal advice to establish whether matters warrant further investigation or are indicative of a substantive claim pursuant to the insolvency. Where the matter is progressed, the relevant defendant will be encouraged to take independent advice on any allegations brought against them.  

The role of legal advisors at this point is as set out above; to combine legal analysis with commercial factors and the objectives of the client to devise a suitable strategy for resolving the matter. 

4. Attempts at early resolution

Before resorting to formal proceedings, parties often explore negotiation or mediation. This can help avoid the time and expense of litigation, particularly if there is scope for compromise or settlement.

5. Formal court proceedings

If a dispute cannot be resolved by way of negotiation or ADR, the matter may proceed to court. A claim will be issued, evidence submitted, and each side will have the opportunity to present their case. Depending on the complexity, this can involve interim hearings, applications for disclosure of documents, and expert evidence.

Typically, parties should try to avoid resorting to legal proceedings given the time commitment, cost and risk involved with such action.

6. Court judgment or settlement

The court will ultimately determine the outcome if the matter goes to trial, issuing a judgment that is legally binding. In many cases, however, parties may reach a negotiated settlement before the final hearing.

7. Enforcement of outcome

Once a judgment or settlement is reached, it may be enforced. This could mean recovering assets for the insolvency estate, redistributing funds to creditors, or directors being held personally liable.

It is an important commercial consideration at the outset of a matter to establish whether there is a reasonable prospect of successful enforcement, given the expense of getting a judgment. 

Advice for directors

When a business enters insolvency, directors and their conduct in the period preceding insolvency will almost certainly come under close examination, making it vital to understand key risks for directors and how to respond.

The Insolvency Act 1986 provides office holders with a range of claims which can be brought against the directors of insolvent entities, which if successful can result in directors being held personally liable to pay monies into the insolvency for the benefit of the creditors.  

Why directors face exposure:

In contentious insolvency disputes, the conduct of directors before and during the decline of the business is often central. They may face personal liability, proceedings for disqualification, or claims from liquidators and creditors looking to recover losses.

We frequently advise directors who:

• Are accused of failing to properly consider the interests of creditors, this is often because the question of liability is highly contextual, so there is no definitive rule.
• Are facing demands linked to personal guarantees or financial support provided to the company or owe the company under a director’s loan account.
• Require legal assistance in responding to investigations, defending proceedings, or seeking negotiated outcomes.

Common grounds for director disputes

1. Investigations and evidence requests: Liquidators hold wide-ranging powers to obtain records and information, from directors or any other entity which has had material dealings with the insolvency entity. Advice can often be required to establish the validity of requests and the extent of compliance.

2. Wrongful trading and misfeasance: Directors may face civil actions for:

• Wrongful trading: continuing operations when insolvency was unavoidable; or
• Misfeasance: failing to act in accordance with the duties under the Companies’ act while insolvency was in contemplation, meaning that the interests of creditors needed to be given proper consideration.

3. Preferences and undervalue transactions: Claims can arise where certain creditors are paid ahead of others or assets are sold below their true value, exposing directors to potential liability.

4. Director disqualification: If a liquidator believes that a director’s behaviour fell below acceptable standards or breached fiduciary duties, they are under an obligation to consider disqualification or sanctioning action. This can result in a ban on acting as a director for up to 15 years.

Personal impact on directors

The consequences of insolvency for directors can be significant, including:

• Loss of control: ultimately, the impact of insolvency is that management responsibility of the insolvent entity passes to the office holder. Directors can no longer make company decisions.
• Exposure under instruments of personal liability, most commonly personal guarantees. This will require appropriate negotiations with the security-holder.
• Personal liability in the event of the existence of a relevant claim, as set out above, there are instances where the office holder can pierce the corporate veil or a limited liability entity and seek payment by the director in their personal capacity into the insolvency. 
• Disqualification risk: serious failings can result in lengthy bans from acting as a director.

Duties of directors in insolvency

Once insolvency becomes likely, directors must shift their focus from shareholders to creditors. This involves:

• Depending on the circumstances, the consideration or even prioritisation of creditor interests.
• More broadly, directors should be mindful of limiting losses and avoiding new liabilities.
• Cooperating with the appointed insolvency practitioner. Despite this, it is vital that directors understand that the office holder’s responsibility is to the insolvent entity’s creditors and therefore directors should seek their own independent advice. 

Failure to comply with these duties can lead to claims and personal exposure.

When a company faces financial difficulty, directors are inevitably placed under the microscope as a potential source of finance for creditors. Directors’ conduct can potentially be scrutinised for a long time prior to the insolvency from actually occurring, depending on the circumstances, and there are a range of potential claims available to an office holder. In our detailed guide for directors, we explore the most common risks, the claims they may face, and the proactive steps that can help protect against liability.

Advice for creditors

Creditors are central to every insolvency process, and in contentious situations, their role can be decisive in maximising recovery. This section looks at the position of creditors and creditor key considerations, legal rights, and why early, proactive action is key to protecting their interests.

Seeing contentious insolvency through the creditor lens

Contentious insolvency arises when disputes occur within an insolvency procedure – often involving claims of fraud, misconduct, or wrongful trading. For creditors, this is not simply about standing back and waiting; it is about active involvement, scrutiny, and challenging decisions where needed. As always, a proactive approach which balances commercial factors (time/cost expense) with the realistic potential outcome is often what gives the best result. Of course, this is often easier said than done when it may not be easy to understand a debtor’s actual financial position.

Our team advises creditors strategically and with a focus on results – from debt recovery and enforcement, to influencing the appointment of insolvency practitioners, and pursuing claims through litigation when required.

How creditors may be affected

Practical commercial interruption: Regardless of a creditor’s position, the insolvency of a contractually linked entity will cause some commercial interruption, though this is a much higher risk in circumstances of trade debtor or where the debtor is a link in product/services supply. 

Delayed payments or reduced returns: Unsurprisingly, insolvency reduces the chances of substantial repayment. This reality needs to be given the necessary consideration when potential solutions are presented.

Insolvency decision-making: A creditor may in a position where it needs to make a decision as to whether to instigate/progress insolvency action. Similarly, creditors are required to agree certain insolvency processes, for example Company Voluntary Arrangements (CVAs), which typically require the consent of all creditors to an insolvent entity.

Complex legal proceedings: Prior to an entity formally entering an insolvency process, creditors may need to decide whether to litigate over the relevant matter or, as above, instigate an insolvency process. While contentious insolvency matters are typically handled by the office holder, it is not unusual for relevant creditors to have some level of involvement.

Risk of asset dissipation: If creditors make incorrect decisions pursuant to the headings above, assets may be lost, leaving creditors with reduced recovery.

Creditors’ rights during insolvency

1. Access to information: Creditors are entitled to receive updates on:

• The financial status of the debtor.
• Progress of the insolvency process.
• Asset recovery and distribution reports.
• Transparency ensures creditors can engage meaningfully in proceedings.

2. Participation in meetings: Creditors may have voting rights on matters such as:

• Choosing or confirming the insolvency practitioner.
• Approving restructuring or liquidation proposals.
• Deciding on key strategies for asset recovery.
• This involvement gives creditors influence over the direction of the case.

3. Right to fair distribution: Assets must be divided according to strict legal rules:

• Secured creditors first.
• Preferential creditors next.
• Unsecured creditors thereafter.
• This structure is designed to ensure equity, even when funds are limited.

4. Right to challenge: If creditors believe an office holder has acted improperly, they can apply to the court to have decisions overturned. This is a vital safeguard for accountability.

Creditors’ role in investigations and claims

In contentious cases, office holders often bring claims to recover value from:

• Directors for misfeasance, wrongful or fraudulent trading, or transactions at undervalue.
• Third parties who may have received improper payments or assisted in removing assets.

Successful recoveries benefit creditors directly, and we support them in influencing or initiating these claims where necessary.

Creditors sit at the heart of every insolvency process, but their decision-making prior to this point can often have an impact on recovery and even the instigation of insolvency action (which may not always be the best course). Where an insolvency process has started, creditors may find themselves involved in contentious insolvency matters and/or decision-making in terms of resolution proposals. Our creditor-focused blog explains how early action and oversight can safeguard recovery.

How insolvency disputes are investigated

Insolvency disputes often arise because there are unanswered questions about a company’s finances, assets, records, transactions or conduct before insolvency. For example, there may be concerns that company property has been removed, debts have not been properly recorded, payments were made to certain creditors ahead of others, or directors failed to act in the best interests of creditors once the company was in financial difficulty.

Once an insolvency office-holder is appointed, such as a liquidator or administrator, part of their role is to investigate the company’s affairs and identify whether there are any claims that could increase returns for creditors. This may involve reviewing the company’s books and records, speaking to directors and employees, examining bank statements and transactions, and considering whether further legal action is appropriate.

For directors, this means they may be asked to explain decisions made before the company entered insolvency, provide access to records, or assist with questions about the company’s financial position. For creditors, these investigations can be important because they may reveal whether assets can be recovered, debts can be pursued, or transactions can be challenged for the benefit of the insolvent estate.

In some cases, cooperation and early disclosure can help resolve issues without formal court proceedings. However, where information is missing, documents are withheld or there are concerns about misconduct, office-holders have statutory powers under the Insolvency Act 1986 to obtain information, recover company property and require certain individuals to assist with their enquiries.

Office-holders and information-gathering powers

When a company enters an insolvency procedure, sections 234, 235, and 236 of the Insolvency Act 1986 (the “Act”) grant insolvency office holders a range of investigatory and recovery powers. 

These provisions enable them to locate and reclaim company property, demand cooperation from individuals connected with the company, and gather key information about its affairs.

Section 234 – delivery of company property

This provision allows an office holder to apply to the court for an order requiring property to which the company is entitled to be handed over. This can include books, records, and other documents, particularly where they are held by third parties. Applications are brought in the office holder’s name. Key points to note include:

• The section only applies where the insolvent company has a legal right to the property. It cannot be used simply because the property (such as documentation) would help the office holder understand the company’s position.
• If ownership is disputed, the court will only make an order under s.234 if it considers it suitable for summary determination. Where the dispute is genuine, the matter must proceed as a standard claim by the company.
• In compulsory liquidation, s.160(1)(c) of the Act gives a liquidator the power to enforce s.234 without seeking a court order, unless a party refuses to comply.

Although applications may be made without notice, this should be limited to cases where advance warning risks injustice – for example, where documents could be destroyed if the respondent were alerted.

Section 235 – obligation to co-operate

Section 235 imposes a statutory duty on certain individuals to assist the office holder. Those subject to this duty include:

• Current and former officers of the company
• Anyone involved in setting up the company in the year before insolvency
• Employees (or former employees within the year prior) who the office holder believes can provide useful information
• Officers and employees of any corporate officer of the company (current or within the year prior)
• In cases where the company is wound up by court order, any former administrator, liquidator, or receiver

This cooperation enables practitioners to obtain a full picture of the company’s circumstances. In more serious cases, the Secretary of State may also request such information when considering whether to pursue director disqualification. A failure to comply with this duty without good reason can result in financial penalties and a court order requiring the non-cooperative party to cover the applicant’s costs.

Section 236 – investigatory powers

Section 236 empowers an office holder to apply to court to summon individuals for questioning about the company’s affairs. Those who can be called include:

• Officers of the insolvent company
• Anyone believed to hold company property
• Persons suspected of owing money to the company
• Individuals who may have relevant knowledge about the company’s dealings

A summons typically results in a private examination, during which the respondent can be questioned directly and may be required to produce an account of their dealings with the company.

Importantly, unlike s.234, section 236 of the Act can be used to obtain information even where the material sought does not belong to the company itself.

There is extensive case law on how the courts approach s.236 applications, particularly balancing the office holder’s role in recovering value for creditors against the potentially onerous effect on those being examined.

For this reason, courts have stressed that any application under sections 234, 235, or 236 must be specific in scope. These powers cannot be used as a broad “fishing expedition” to see what information might emerge.

Legislation update (February, 2025)

In December 2024, our insolvency team released an insightful piece exploring how the Insolvency Act 1986 can be applied as a tool for gathering information (Information-gathering powers under the Insolvency Act 1986). Since then, new legislation has come into force which extends the scope of Insolvency Practitioners’ powers to access details about companies and their directors.

The main effect of these Regulations is that the Registrar of Companies (responsible for overseeing Companies House) now has the authority to share information it holds if satisfied that the data is necessary for an Insolvency Practitioner to pursue specific types of claims. These include, among others, wrongful trading, preferential payments, and transactions carried out at an undervalue.

This change has not been introduced in isolation. The role of the Registrar has also been reshaped by the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023). One of the most significant reforms under ECCTA 2023 is that Companies House is no longer obliged to accept filings at face value. Instead, the Registrar can require those submitting documents to provide additional verification or evidence and may reject filings if the information provided contradicts existing records.

The Insolvency Act 1986 provides office holders with broad scope to obtain information about an insolvent entity, but it is in the detail of sections 234 to 236 of the Act which can result in complex litigation as to whether a third party is required to assist or disclose documentation relating to a company’s affairs. These powers can make the difference between recovering value for creditors and leaving questions unanswered.

Contentious insolvency FAQs

Our team is asked a number of common questions surrounding contentious insolvency on a daily basis, here are some of the top questions answered by our experts. 

1. What is the difference between contentious and non-contentious insolvency?

Non-contentious insolvency relates to the establishment, and implementation insolvency processes themselves following appointment of the office holder, such as creditors’ voluntary liquidations or bankruptcies. Meanwhile, contentious insolvency refers to the more adversarial aspects such as where there is a dispute as to whether an insolvency event should occur, obtaining information where requests are opposed and considering the wide range of claims available to an office holder to ultimately increase the return to creditors.

2. Who can bring a director or third party liability claim when an entity is insolvent?

The decision of whether to bring a claim of this nature lies with the office holder (in their capacity as a liquidator, administrator or trustees in bankruptcy). 

3. What are common examples of contentious insolvency disputes?

Typical disputes include:

• Litigation relating to the placing of an entity into insolvency.
• A range of claims against directors of insolvent companies, including – 
  • Challenges to transactions at undervalue or preferences.
  • Allegations of wrongful or fraudulent trading by directors.
  • Misfeasance claims (breach of directors’ duties).
  • Recovery or settlement of director loan accounts.
• Enforcement of alternative security by holders.
• Disputes between creditors over entitlement to assets.
• Challenges to the conduct or decisions of insolvency practitioners.

4. Can directors be held personally liable in contentious insolvency?

Yes. A wide range of claims can be considered by office holders against directors, linked to their actions while insolvency was either contemplated or unavoidable, beyond financial liability to the company’s creditors, disqualification proceedings can also be sought against directors.

5. How long do contentious insolvency proceedings take?

The timescale depends on the complexity of the dispute. Some claims may be resolved through negotiation or mediation within weeks or months, while court proceedings can take significantly longer, especially if appeals are involved.

6. What happens if a creditor disputes an insolvency process?

Creditors can challenge the validity of the insolvency process or the actions of the insolvency practitioner. This may involve filing a claim in court to protect their position and ensure a fair distribution of assets.

7. How can legal advice help in contentious insolvency?

Specialist legal advice is crucial. A solicitor can:

• Assess the strength of potential claims or defences.
• Represent you in negotiations or court proceedings.
• Help protect assets and minimise personal liability.
• Ensure compliance with insolvency law and procedure

Our services and solicitors

Insolvency issues can be extremely complicated and costly for any individual or business, so it’s important to receive timely specialist advice from an insolvency solicitor.

Our insolvency team advises directors and creditors across the full spectrum of contentious insolvency matters. From early-stage restructuring advice to representing clients in complex disputes and investigations, we offer clear, strategic support tailored to your position.

We act for company insolvency and individuals that are in financial difficulty and have a close relationship with some of the largest insolvency firms in the South West and London. Acting closely with specialist Barristers, Tax Advisors and Accountants to ensure that you have the best chances of achieving a successful outcome.

Our range of insolvency services:

1. Insolvency disputes
2. Corporate insolvency
3. Claims against insolvent companies
4. Tax disputes
5. Director disqualification
6. Company directors
7. Creditor services
8. Personal insolvency

How we help individuals:

• Assisting individuals and businesses on making or resisting a bankruptcy petition
• Advising individuals and businesses on making or resisting a winding up petition or making bankruptcy petition
• Enforcement of debtor or third party obligations/defaults/securities
• Advising directors of their duties and responsibilities
• Directors disqualification
• Advising insolvency practitioners on their appointments and assisting them with disputes arising during their administration or liquidation e.g. regarding repayment of directors loans or the unlawful payment of dividends
• Transactions at an undervalue, defrauding creditors and preferences
• Wrongful and fraudulent trading, misfeasance and breach of duty claims against directors
• Advising creditors on insolvency claims they may have; and
• Injunctive relief i.e. a court order that prevents or makes a person or company do something.

How we help businesses:

• Advising businesses at the outset of corporate insolvency proceedings, to devise a tailored strategy going forward.
• Acting on behalf of companies and its directors in respect of claims brought by Insolvency Practitioners, Official Receiver or Liquidators that have arisen from the insolvency. There are many actions that can be taken against directors personally. Claims include wrongful trading, misfeasance (breach of duty) including negligence, unlawful dividends, preferences and transactions at an undervalue.
• Advising companies that have received a Statutory Demand or some form of notice of intended insolvency proceedings, which can result in taking steps to issue Injunction proceedings to prevent presentation of the winding up petition or advertisement of the same, or taking steps to negotiate a settlement to avoid Court.
• Defending Winding Up Petitions presented at Court by creditors.
• Advising the company and its directors on the insolvency options available, in situations when it is more beneficial or necessary to take proactive voluntary insolvency steps. These may include Company Voluntary Arrangements (CVAs) or Members Voluntary Arrangements (MVAs) or Administration. Often, such vehicles are much more beneficial for a company and its directors than allowing the company to be compulsorily wound up by creditors.
• Advising companies and directors on any claims, counterclaims or set off claims they may have.
• Advising directors in respect of director disqualification proceedings under the Company Director Disqualification Act 1986.
• Advising Insolvency Practitioners, creditors and Liquidators in respect of claims that they may have against an insolvent company or directors.
• Advising struggling companies on their duties, responsibilities, liabilities and risks presented by insolvency. Taking timely advice can avoid serious issues later on. We have published a short article on our website that highlights some of the risks that struggling companies face in this regard.
• Acting on behalf of companies and creditors wishing to purchase assets, goodwill and trading names from insolvent companies and, where necessary, creating new companies from which to trade.

Recent contentious insolvency cases

• Advising on a preference claim under s.239 of the Act which also involved complexities relating to a personal guarantee liability. this matter highlighted the importance on taking legal advice as early as possible, which would likely have prevented the client from having a claim brought against them at all.
• Providing advisory assistance to a director concerned about the financial health of their business, at a time when insolvency was likely but not certain. The provided the director with a clear understanding of their legal obligations during this time and with a framework to demonstrate compliance, to minimise the risk of allegations in the event the company did enter an insolvency process. The director reported that this advice gave them both peace of mind and the confidence to continue to conduct the business of the company.
• We regularly advise clients on substantial personal guarantee liabilities in circumstances where the relevant commercial entity has entered insolvency. In one recent case, a substantial reduction has been agreed with the lender along with scope for further reductions as incentive for fast repayment. 
• We have recently resolved several matters relating to indebtedness pursuant to a director’s loan account, outstanding when the company entered insolvency, acting for the office holder of the insolvency company in one instance and the director in another. Cases of this nature involve legal analysis of the payments made by directors and ultimately pragmatic negotiation to achieve an effective outcome.

Insolvency resources

We understand that insolvency can be daunting, whether you are a director, creditor, office holder, or simply trying to make sense of your rights and obligations. That’s why we regularly publish blogs, articles, and insights to provide practical guidance on both the legal framework and the real-world challenges that come with insolvency.

Our insolvency resources are designed to help you understand the steps you can take to protect your position, reduce risk, and navigate disputes when they arise. From early warning signs and director responsibilities to creditor rights and the powers available under the Insolvency Act 1986, our team shares expertise in a clear and accessible way.

Below you’ll find links to some of our most recent insolvency-related content, covering key areas for businesses, individuals, and practitioners alike:

• Why Early Action Matters – An overview of why recognising financial distress early can make all the difference, including the practical benefits of taking proactive steps.
• Advice for Directors – Guidance for company directors on duties, liabilities, and the importance of seeking timely advice when facing potential insolvency.
• Considerations for Directors Facing Insolvency: This article provides a more detailed explanation as to what directors’ duties are and what can be done to ensure they are being complied with.
• Advice for Creditors – A practical look at the rights and remedies available to creditors during insolvency, including how to challenge disputes and protect your position.
• Information Gathering Powers – A detailed breakdown of sections 234, 235, and 236 of the insolvency act 1986, exploring how these powers allow office holders to investigate companies and recover assets.
• Feb 2025 Legislation Update – An update on recent legislative changes, including new powers for Insolvency Practitioners and reforms to the role of the Registrar under ECCTA 2023.

Further help and guidance

We know that insolvency is never just a legal process – it’s a stressful and often emotional experience for the individuals and businesses involved. That’s why we take a personal, empathetic approach to every case, supporting our clients at each stage of the journey.

Whether you are a director facing difficult decisions, a creditor trying to protect your position, or an insolvency practitioner navigating complex claims, our team will work closely with you to make the process clearer and more manageable. 

We combine technical expertise with practical advice, helping to ease the pressure and give you the reassurance that you are not facing these challenges alone.

By guiding you step by step, we aim not only to resolve disputes effectively but also to provide peace of mind – so you can focus on moving forward with confidence.

Get in touch today to learn more about our Insolvency services and get tailored advice and guidance from our legal team.

About the author

Tim McMahon

Senior Associate Solicitor

Banking & Finance Litigation

02039784726

tim.mcmahon@ellisjones.co.uk

London Office

I am a Senior Associate Solicitor in the Banking & Finance Litigation team, though my caseload encompasses a wide range of legal sectors. Since joining Ellis Jones in June 2021 in the expanding London office, my goal is to provide pragmatic advice, tailored to the individual circumstances of each client. 

Litigation can often be complex, so I aim to provide clear advice which allows the firm’s clients to make informed decisions, ultimately leading to a positive outcome.

I have experience in handling a range of insolvency disputes and cases for a number of clients, and specialise in asset recovery, winding up and bankruptcy petitions, wrongful trading and misfeasance claims, and unfair prejudice and derivative claims.

Learn more about Tim.