Directors & Companies in Financial Distress
Practical legal advice for directors and boards facing cash flow pressure, creditor demands and uncertainty about whether the company can continue.
Enquire NowJonathan Lea Network advises directors, boards and shareholders of companies under financial pressure, before any formal insolvency process is on the table. We advise on the cash flow and balance sheet insolvency tests, whether continued trading can be justified, which payments can safely be made, how board decisions should be recorded, and what commercial options remain available. We act for companies of all sizes across England and Wales, and our objective is to keep as many options open to you as the position allows.
Understand your position before you make the next decision
A company under pressure gives its directors two problems at once.
The commercial problem is obvious. The money coming in does not cover the money going out, and every week of delay narrows the choices. The legal problem is quieter. As the position worsens, the rules governing what you may do with the company’s money change, and they change well before anyone appoints an insolvency practitioner.
We advise directors and boards during exactly that period. You will get a clear view of where the company stands against both statutory tests, what you can and cannot do, and what needs to be recorded. Where the business can be stabilised, that is the objective. Where it cannot, the objective becomes an orderly process and a protected position for you personally.
Speak to our team for clear advice on your duties, your options and the risks attached to each of them.
The questions directors actually ask us
Can we keep trading? Is it safe to pay this invoice? Can I take back the money I lent the company? What happens to my house if this goes wrong? Should I be speaking to an insolvency practitioner, and does that mean it is over?
Those are the real questions, and the answers depend on where the company sits financially and on what you can show about how each decision was reached. We will work through them with you in plain terms.
Common situations we are asked about
| The situation | What we will advise on |
|---|---|
| HMRC arrears are building, or a time-to-pay arrangement has broken down | Whether a further arrangement is realistic, what happens if it is refused, and how to manage the risk of enforcement while you negotiate. |
| A key supplier has put you on stop and you cannot get materials | What the supply contract allows, whether payment on account can be structured safely, and how to handle claims over goods already delivered. |
| The bank has flagged a covenant breach, or is reviewing your facility | What the facility documents allow the lender to do, what a waiver or standstill would involve, and where that leaves any director who has given a guarantee. |
| A creditor is threatening a statutory demand or a winding-up petition | Whether the debt can genuinely be disputed, what can be done to stop the threat, and how quickly it has to happen. |
| You want to pay a particular creditor, or repay a director’s loan | Whether that payment can safely be made now, and what should be recorded if it is. |
| Somebody has approached you about buying the business | Whether the structure of the deal is safe for you, and where the buyer’s money is actually coming from. |
| You are not sure whether to keep trading at all | What the board needs to look at before deciding, how to record the decision, and what the exposure is if the answer turns out to be wrong. |
Whether the company is insolvent on either of the legal tests, how your duties change as the position deteriorates, and what options exist before any formal process, are all covered on our page on The Zone of Insolvency.
If you are selling the company, check where the buyer’s money is coming from
One arrangement catches sellers out repeatedly. The buyer has no money of its own and funds the purchase price out of the target company’s bank account, usually documented as a loan back to the buyer.
The High Court looked at exactly that structure in Manolete Partners Plc v Smith [2026] EWHC 1046 (Ch). A long-established business was sold on those terms and failed within months, and the seller was ordered to repay money he had held for four years. The court also confirmed that relying on your solicitors will not protect you where the risk to the company should have been obvious and you were the one who benefited. The decision makes this way of funding a sale much harder to defend.
If a buyer proposes something along these lines, take advice on the funding before you complete. That is the only point at which it can be fixed.
How we can help
We start with a call, usually in the same week. Where the position is urgent we work from the management accounts and the bank statements rather than waiting for formal forecasts to be prepared.
You will receive a written note setting out where the company stands against the tests, what you can do, what you should not do, and what to record. If the right answer is a formal step, we will say so and help you take it in a controlled way, working alongside an appropriate insolvency practitioner.
FAQs: Directors & Companies in Financial Distress
Not necessarily. Continued trading is defensible where the board has a reasonable basis for believing the company can avoid insolvent liquidation and keeps testing that belief as things change. What causes problems is carrying on without looking, and without recording why. It depends on who they are and why you are paying them. Payments to connected creditors, and payments that reduce a debt a director has guaranteed, are the ones most likely to be challenged. Take advice on the specific payment before you make it. You can, most commonly through a personal guarantee, wrongful trading, misfeasance, an overdrawn loan account or a claim to recover a payment made before insolvency. Advice taken while the company is still trading is normally what reduces that exposure. The decision, the reason for it, the financial information relied on, the alternatives considered and why they were rejected, and the date the decision will be reviewed. Contemporaneous records are worth considerably more than recollection three years later.
Get a clear view of where the company stands
You do not need to have decided anything before you speak to us. Send us a short summary of the position and any key financial information, and we will tell you where the company sits, what you can safely do and what your realistic options are.
Contact Us
We provide most enquiries with an indicative scope of work and fee estimate, based on the information you share. We aim to respond within one working day.
In the same email, you will be invited to arrange a 20-minute complimentary, no-obligation video consultation, should the proposed scope of work and fee estimate be of interest. This initial discussion is designed to help us better understand your requirements, refine the scope of work and ensure our approach is fully aligned with your objectives.Following the call, we will email you a definitive, formal fee estimate for you to consider and approve.
Where you would prefer to receive initial advice and guidance from the outset, or where a short introductory call would not be the most appropriate starting point, we may instead recommend a 2.5-hour fixed-fee appointment, starting from £750 + VAT. This enables us to review the information you provide, discuss your situation with you and provide considered, tailored advice at an early stage.
To make an enquiry, please email us at wewillhelp@jonathanlea.net, complete our contact form, or call us on 01444 708640.
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However, please be aware that the free 20 minute call is at our discretion. If you are more looking for advice and guidance on an initial call, we may instead offer a one-hour fixed fee appointment instead.
Our fixed fee appointments are between £250 plus VAT to £350 plus VAT* depending on the complexity of the issues and seniority of solicitor taking the call