This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
A comprehensive guide to restructuring a company during insolvency proceedings in England and Wales. Learn about options such as Company Voluntary Arrangements (CVAs), administration, pre‑pack sales, moratoriums and restructuring plans, plus practical steps, creditor negotiations and key legal considerations for directors and stakeholders.
What Restructuring in Insolvency Means
Restructuring a company is a process by which a business in financial difficulty reorganises its operations, debts or legal structure in order to survive, improve its financial position, or maximise returns for creditors. In England and Wales, this often occurs within the context of insolvency proceedings, where formal legal mechanisms provide protection from creditor action and a structured framework for negotiating changes with creditors and stakeholders. Restructuring may involve agreements with creditors, formal insolvency procedures such as administration or a Company Voluntary Arrangement (CVA), or other legally sanctioned plans. These tools can provide breathing space, enable continued trading, or facilitate a negotiated exit from financial distress.
Why Restructure During Insolvency Proceedings?
When a company cannot pay its debts as they fall due or has liabilities that exceed assets, directors are legally obliged to consider restructuring options rather than continuing to trade at a loss. Restructuring during insolvency proceedings can:
- Protect the company from creditor enforcement through a statutory moratorium;
- Provide time to negotiate with creditors and agree new terms;
- Enable the business to continue operating while solving structural financial problems; and
- Maximise returns to creditors compared with outright liquidation.
The choice of restructuring path depends on the company's prospects, the complexity of its debts, and the interests of its creditors.
Key Restructuring Options During Insolvency
Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) is a formal agreement between a company and its creditors that allows the company to repay debts over a period while continuing to trade. An insolvency practitioner prepares and presents the proposal to creditors, who must approve it by 75% (by value of claims) to make it legally binding on all unsecured creditors.
A CVA typically:
- Enables the company to restructure how debts are repaid and may include lump‑sum payments or reduced amounts over time;
- Allows directors to remain in control of the business; and
- Provides creditor protection from legal action once approved.
This approach suits companies with fundamentally viable operations that are burdened by short‑term financial problems, offering a negotiated route out of insolvency without surrendering control to an administrator.
Administration and Trading Administrations
Administration is a formal insolvency procedure under the Insolvency Act 1986 in which an appointed administrator takes control of the company with the primary aim of rescuing the company as a going concern. If rescue is not possible, administrators may restructure the business, sell parts of it, or negotiate settlements with creditors to achieve the best possible return.
An administration often imposes a statutory moratorium on legal actions by creditors, giving breathing space for restructuring talks or sales. Administrators may continue to trade the business (“trading administration”) to preserve jobs and maintain value pending a more permanent solution.
Pre‑Pack Administration
A pre‑pack administration involves arranging the sale of all or part of the company's business or assets before the administrators are formally appointed. The sale is executed immediately on the appointment of the administrator. This can provide a rapid route to restructuring by transferring the viable parts of a business to a new entity, preserving the ongoing operations, and generating funds to repay creditors.
Pre‑packs can be effective in preserving value and jobs, but they must be carefully structured to ensure fair treatment of creditors and compliance with legal requirements.
Moratoriums and Restructuring Plans
Under the Corporate Insolvency and Governance Act 2020, companies can enter into standalone moratoriums which provide temporary protection from creditor action while directors develop a restructuring plan. A moratorium typically lasts 20 business days initially and can be extended, helping the company to negotiate new terms without the immediate threat of enforcement.
In more complex situations, companies may pursue restructuring plans, which are court‑approved agreements between the company and classes of creditors. These plans can bind dissenting creditors if the court deems the arrangement fair and equitable, making them an important tool for large or multi‑stakeholder restructurings.
Preparing for Restructuring
Before entering formal insolvency proceedings, directors should gather up‑to‑date financial information, including cash flow forecasts and balance sheet assessments. Accurate records help insolvency practitioners and directors assess the best restructuring option and support negotiations with creditors.
Restructuring discussions should involve:
- Honest disclosure of financial information to creditors;
- Good‑faith negotiations with key stakeholders; and
- Professional advice, including from licensed insolvency practitioners and solicitors with restructuring expertise.
Employing experienced advisers is essential because directors must ensure they act within legal obligations, including avoiding preferential treatment of certain creditors or transactions at undervalue which could later give rise to claims in liquidation.
Employee and Contractual Considerations
Restructuring often affects employees and contractual relationships. Directors must consider statutory employment rights, collective consultation requirements for redundancies, and the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) if a business or part of it is sold. Failure to address these properly may expose the company to tribunal claims or compensation liabilities.
Contracts may include ipso facto clauses allowing termination on insolvency, but restructuring procedures can limit the operation of such clauses, helping preserve essential contracts during restructuring.
Risks and Legal Challenges in Restructuring
Directors must be aware of potential risks during restructuring:
- Wrongful trading liability if continuing to trade when insolvency is inevitable;
- Claims for transactions at undervalue or preferences if restructuring actions unfairly benefit some creditors over others; and
- Challenges to restructuring agreements if creditors believe terms are unfair or negotiated in bad faith.
Professional advice can help minimise these risks by ensuring transparent processes and compliance with statutory duties.
After Restructuring: What Happens Next?
Once a restructuring plan such as a CVA, administration arrangement, or restructuring plan is approved, the company proceeds under its terms. Under a CVA, the company resumes trading and makes agreed payments to creditors, with the insolvency practitioner supervising compliance. In administration, the company may emerge from insolvency once a sale or restructuring is complete, or it may move into liquidation if rescue is not possible.
All restructuring outcomes aim to balance the interests of creditors, directors and, where possible, employees, while preserving business viability.
Key Takeaways
Restructuring a company during insolvency proceedings in England and Wales involves legal mechanisms that provide protection from creditor action and structured ways to reorganise debts and operations. Common tools include Company Voluntary Arrangements, administration, pre‑pack sales, and court‑approved restructuring plans, supported by statutory moratoriums. Preparation, transparency, negotiation in good faith and compliance with director duties are essential throughout the process. These mechanisms offer potential paths to safeguard business continuity, improve financial prospects, and deliver better outcomes for creditors than immediate liquidation.
