If you have been working with a company you believe might have fallen on hard times financially and have an invoice that has yet to be paid there are some steps you can take to ascertain what their situation is. This article will explain those in detail.

If you’re trying to see if your own company is insolvent, there are different steps to take. You should use our free insolvency test here to gauge the severity of your situation.

5 Ways to Research Whether a Company is Insolvent

Do a Search via Companies House

Companies house offers an online search facility here where you can check the trading status of a company. The search will show you whether the company has ceased trading, is insolvent or dissolved. If it’s already dissolved, you will see it listed as ‘struck off’, but if things haven’t reached that stage, Companies House is unlikely to give you concrete information on whether the company is insolvent.

There is no official Companies House insolvency register, but for that, you should use the government’s own portal mentioned in the next paragraph.

Check if the Company is in Provisional Liquidation?

The most accurate resource on provisional liquidations is the government’s own page here. This page will show you an updated list of companies that have received a Winding up Petition (a final warning letter to settle debt before enforced liquidation) or who are in provisional liquidation (this is where the government appoints its own liquidator, provisionally, as a way to safeguard company assets etc).

Check the London Gazette Insolvency Notices

If you think a business might be struggling and fear the worst, it is possible to find out what’s going on. The first place to check whether the business has gone into administration or liquidation is the London Gazette.

This is a free service that allows you to search and browse a register of corporate insolvency procedures and changes to registered office addresses and ownership. Just entering the company registration number or trading name will show you whether any notices have been posted about a particular company.

For Sole Traders, Search the Individual Insolvency Register

If your debtor is an individual operating as a sole trader, you’ll need to use the government’s insolvency register here.

Search for people with Bankruptcy and Debt Relief Restrictions

Again, this is not relevant for companies but, but the government’s updated list of bankruptcy restrictions is one potential area to check. This page details individuals who have broken the terms of a bankruptcy or Debt Relief Order.

How do I know if my own Company is Insolvent?

If you are a director of a UK limited company, and you believe that your company is insolvent or at risk of becoming insolvent, there are two simple tests you can do to ascertain your position.

You can do these yourself or in conjunction with your accountant.

  1. Cash Flow Test: Do you have enough cash flow at this point in time to pay your bills? If this test concludes that the company owes more than it has in the bank, you are insolvent. Obviously, if you have a big invoice waiting to clear, this doesn’t mean the company has no options, but it’s an indicator of a precarious financial situation. When insolvent, a company must prioritise creditors’ interests before shareholders under UK law.
  2. Balance Sheet Test: A balance sheet test involves analyzing the company’s assets, contingent liabilities, and equity to determine its financial position. The purpose of this test is to show that if you sold your assets, can you pay creditors? If the answer is even potentially no, you could be insolvent and should seek professional advice immediately

Use our instant insolvency test tool to help you check your company’s financial position.

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What to do if you suspect your company is insolvent

  • Seek professional advice from an insolvency practitioner such as ourselves. We offer a free consultation in complete confidence and without obligation.
  • Gather any financial records to clarify the company’s financial position
  • Conduct a financial assessment to identify the extent of the company’s financial difficulties
  • Record all your actions carefully to demonstrate that you have acted in the best interests of the company and its creditors
  • Do not pay anyone, including yourself, as this may be considered an unlawful preference
  • Do not dispose of company assets as this may be considered fraudulent trading or a breach of your duties as a director

It is important for directors to act quickly and seek professional advice if they suspect that their company is insolvent.

FAQs

Yes, credit score platforms often use a variety of data to rate a company’s creditworthiness. A low score could indicate insolvency or that the business is at risk of becoming insolvent.

If a company consistently pays its invoices late, it may be facing cash flow issues, which is a common precursor to insolvency.

The most conclusive way to confirm a company’s insolvency is through official channels like court records or announcements from an insolvency practitioner handling the case.