How do I know if my startup is officially insolvent?

In the UK, insolvency is triggered if you can't pay debts as they fall due or if your liabilities outweigh assets on the balance sheet. Under the Insolvency Act 1986, continuing to trade while insolvent can lead to personal liability for directors. Don't wait; if your cash runway is under 30 days, legal advice is mandatory.

Can I still sell the IP if the company is failing?

Yes, but it must be at 'fair market value' to avoid being flagged as a transaction at an undervalue. If you sell assets to a new entity for pennies, liquidators can claw them back up to 2 years later. Document every valuation to prove you acted in the best interest of creditors.

What happens to my R&D tax credit claims in distress?

If you enter formal liquidation or administration, HMRC generally stops processing R&D tax credit payments. However, if you are in a 'going concern' rescue phase, you can often still claim. It is vital to file these claims early, as they can provide a non-dilutive 18.6% to 33% cash injection when you need it most.

Am I personally liable for the company's debts?

Generally, no, thanks to limited liability. However, you lose that protection if you've signed personal guarantees on loans or if you are guilty of 'wrongful trading.' Since 2021, HMRC has also regained 'secondary preferential creditor' status, meaning they get paid before floating charge holders and unsecured creditors. Keep your tax filings current.

Should I go for a CVA or a Pre-pack Administration?

A Company Voluntary Arrangement (CVA) allows you to keep control while paying back debts over time, but it requires 75% creditor approval by value. A Pre-pack Administration sells the business and assets immediately to a new vehicle. While faster, Pre-packs face heavy scrutiny from the 'Pre-pack Pool' to ensure the deal is transparent and fair.

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