UK: A Restructuring/Insolvency Overview

Corporate Insolvency in the UK

2025 has proven a testing period for UK small and medium-sized enterprises (SMEs). Despite initial hopes of post-inflation stability and a rebound in business investment, the latest insolvency figures continue to highlight fragility across key sectors. Yet beneath the pressure points, there are also signs of resilience and opportunities for early intervention, financial review, and structured risk responses.

One in 190 of companies on the UK Companies House register entered insolvency in 2025. The number of compulsory liquidations was at its highest annual number since 2012. The past four years have seen the highest four numbers of company voluntary liquidations since the time series began in 1960.

Compulsory liquidations are commenced by an unpaid creditor presenting a petition to the court and seeking a court order to wind up the company. Members voluntary liquidations (where the company is solvent) or company voluntary liquidations (where the company is insolvent) are instituted by the company’s board calling a meeting and do not require court involvement. The voluntary process tends to be much cheaper but is perceived to come at the price of less scrutiny. Whether compulsory or voluntary, liquidations are undertaken by independent insolvency practitioners, who are, in the UK, a distinct regulated profession.

By contrast to the figures for corporate liquidations, insolvency rescue procedures, like administration and company voluntary arrangements, have seen a slight decrease. In 2025, administrations saw a decrease of 6% from 2024 volumes and company voluntary arrangement numbers decreased by 8% from those in 2024.

An administration is a statutory process to allow a rescue package or more advantageous realisation of assets to be put in place. An administrator, who is an insolvency practitioner, is appointed to manage a company’s affairs, business and property for the benefit of the creditors. The administrator has the status of an officer of the court (whether they are appointed by the court, or not). There is a hierarchy of objectives of administration: the primary objective is to rescue a company as a going concern; if the primary aim is not reasonably practicable, the administrator may instead act to achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration); and in certain circumstances, the third objective, to realise the value of property in order to make a distribution to one or more secured or preferential creditors, may be pursued.

A company voluntary arrangement is a statutory procedure by which a distressed company can enter a composition of debts or a scheme of arrangement out of court with its unsecured creditors, provided at least 75% in value vote in favour. The process is managed by an insolvency practitioner. The unsecured creditors, including those who voted against it, are bound by the arrangement. Secured creditors cannot be prevented by the arrangement from enforcing their security unless they agree to be bound by the arrangement. Preferential creditors cannot be treated under the arrangement in a way which does not recognise their right to be paid rateably ahead of non-preferential creditors unless they consent to this.

Newer forms of rescue process similarly faced a limited take-up. There were only 8 moratoriums and 22 restructuring plans registered at Companies House in 2025.

These two new procedures were created by the Corporate Insolvency and Governance Act 2020.

A moratorium gives struggling businesses 20 days’ formal breathing space in which to explore rescue and restructuring options, free from creditor action. Except in certain circumstances, no insolvency proceedings can be instigated against the company during the moratorium period. It also prevents legal action being taken against a company without permission from the court. The moratorium will be managed by a monitor, who is a licensed insolvency practitioner. The moratorium can be extended for a further 20 business days without creditor consent, or for a longer period with creditor consent or by the court.

A restructuring plan allows distressed companies to create a structured turnaround plan with creditor and shareholder support. A restructuring plan requires two court hearings: (i) to convene meetings of creditors (and members) and (ii) a sanction hearing to approve the decisions of the class meetings. Classes of creditors vote by a 75% majority in value in each class to approve the plan. At the sanction hearing the court may still approve the plan even if one or more classes have voted against the RP, by exercising its power to cram down the dissenting class(es).

With creditors themselves often under pressure for payment, the figures may reflect a reduced appetite for rescue. In 2025, company voluntary liquidations were the most common company insolvency procedure (77%), followed by compulsory liquidations (16%), administrations (6%) and CVAs (1%), whilst receivership appointments made up less than 1% of cases.

Personal Insolvencies in the UK

A similar picture can be seen in the UK population. The number of individual insolvencies registered in 2025 was 126,240, 7% higher than the 117,958 registered in 2024 (equating to one in 395 adults). This is notwithstanding any expected fall-off with Brexit from bankruptcy tourism from European debtors now unable to benefit from the friendlier bankruptcy regime in the UK (the period before automatic discharge from bankruptcy is 12 months and allows release from most consumer debts).

There has been a steady creep up in the number of individual voluntary arrangements, despite the drop in 2023 coinciding with the Financial Conduct Authority introducing a ban on debt packagers receiving remuneration for referrals to IVA firms and the recognised professional bodies adopting a new Statement of Insolvency Practice in relation to take-on procedures.

An individual voluntary arrangement is a statutory procedure by which a debtor can enter a composition of debts or a scheme for repayment out of court with their unsecured creditors, provided at least 75% in value vote in favour. The process usually involves the debtor paying into the arrangement for a number of years. If approved, the arrangement is binding on all creditors, whether or not they voted for it. The process is managed by an insolvency practitioner.

Whilst there was a slight reduction in bankruptcies since 2024, the annual numbers of debt relief orders (popularly known as a “poor man’s bankruptcy”) reached the highest volume since their introduction in 2009. Large increases followed the expansion of the eligibility criteria in June 2024 and the removal of the GBP90 administration fee from 6 April 2024.

Under the Debt Respite Scheme Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, eligible individual debtors with problem debt may benefit from a period of protection from their creditors known as a “breathing space moratorium”. The aim is to give people the time to access professional debt advice, without the stress caused by spiralling debt and impending enforcement action. However, payment of all “ongoing liabilities” must continue during this time. There are two types of moratorium: a standard breathing space moratorium gives eligible debtors 60 days’ legal protection from creditor action to seek professional debt advice, pausing most enforcement action and contact from creditors, and freezing most interest, fees, and penalties on their debts. A mental health crisis breathing space moratorium protects someone who is receiving mental health crisis treatment for the duration of the treatment, plus 30 days.

In 2025, there were 89,130 breathing spaces registered, the highest annual total since the start of the scheme in 2021. Of these, 87,813 were standard breathing space registrations and 1,317 were mental health breathing space registrations.