As we move deeper into 2025, Directors must prepare for an insolvency landscape that is harsher, more regulated, and significantly less forgiving than in recent years.
While the COVID-19 era brought temporary moratoriums and government leniency, those protections have well and truly expired. Today, enforcement is accelerating—and directors who fail to adapt risk not only the collapse of their companies but personal liability, disqualification, and reputational damage.
Here’s what directors need to know about the sophisticated, evolving risks of insolvency in 2025.
1. The Resurgence of Creditor-Led Winding Up Petitions
After years of relative dormancy during the pandemic, creditor-led winding-up petitions are now a key tool for recovery efforts—especially by HMRC and institutional creditors.
- Data Point:
In Q1 2025, compulsory liquidations rose by 39% compared to the same period in 2024, with HMRC filing nearly 55% of all petitions. - What It Means:
Directors can no longer rely on time-buying tactics. Even relatively modest unpaid debts (£750 or more) can trigger formal action.
Early engagement with creditors—and credible restructuring proposals—are essential to avoiding court-ordered liquidation.
2. HMRC’s Aggressive Use of Personal Liability Notices (PLNs)
HMRC is no longer simply another unsecured creditor. In cases where tax debts (particularly VAT and PAYE) are deemed deliberate or attributable to director misconduct, HMRC can—and increasingly does—issue Personal Liability Notices.
- Niche Fact:
Recent HMRC internal guidance now authorises officers to pursue joint and several liability where directors have a history of phoenixism (repeatedly liquidating and restarting businesses). - What It Means:
Directors face direct financial exposure even if the company fails. Paying employees but withholding PAYE payments to “keep the lights on” can now trigger personal liability.
3. Sectoral Stress Points: Construction, Retail, and Hospitality
Not all insolvencies are created equal. Certain sectors face particularly acute risk:
- Construction:
1 in 5 construction companies is forecast to experience “critical” financial distress in 2025 due to material costs, labour shortages, and insurance premium spikes. - Retail and Hospitality:
New business rates revaluations and end of energy bill relief schemes are pushing thin-margin businesses toward insolvency at alarming rates. - What It Means:
Directors in these sectors must implement early warning systems: cash flow forecasting, covenant testing, and scenario planning are no longer optional.
4. Post-Pandemic Loan Enforcement: Bounce Back Loans and CBILS Under the Microscope
Liquidators are now routinely investigating the use (and misuse) of Bounce Back Loans (BBLs) and Coronavirus Business Interruption Loans (CBILS) in failed companies.
- Legal Development:
Misuse of government-backed loans (e.g., using BBLs for personal benefit) can support both misfeasance claims and director disqualification proceedings under the Company Directors Disqualification Act 1986. - What It Means:
Directors must be able to evidence how BBL/CBILS funds were applied for the economic benefit of the company—not for personal use or unrelated ventures.
5. Stricter Enforcement and Disqualification Activity
The Insolvency Service has significantly ramped up its focus on Directors post-liquidation, particularly around misconduct linked to pandemic support misuse and creditor prejudice.
- Special Initiative:
The Insolvency Service’s ‘Targeted Enforcement Programme’ now pools intelligence from HMRC, BEIS, and Companies House to fast-track director disqualification proceedings. - What It Means:
Directors face a growing risk of bans lasting up to 15 years, often based on detailed digital evidence (banking data, online transactions, company filings).
Being unaware or ill-advised is no longer a viable defence.
What Directors Must Do to Stay Ahead
Insolvency no longer operates in a grey area; directors must demonstrate proactivity and transparency at every stage.
Key protective actions include:
- Documenting all major financial decisions during times of distress.
- Engaging restructuring professionals early to advise on insolvency options.
- Ensuring tax compliance remains a top priority, even during cash shortages.
- Avoiding any transactions that could later be construed as preferential or undervalued.
2025 Rewards the Prepared, Not the Lucky
Directors who act early, seek advice, and make creditor-centric decisions stand the best chance of navigating this harsher environment successfully. Those who don’t risk personal consequences that extend far beyond the collapse of their companies.
At IL Advisory, we provide bespoke, director-focused guidance to help you manage insolvency risks while safeguarding your future.
Need Strategic Insolvency Advice?
If you’re seeing early warning signs—or want to proactively protect your position—speak to IL Advisory today for a confidential consultation.
– Specialist advice tailored for directors
-Insight-driven strategies based on 2025 enforcement trends
– Fast, practical support when it matters most
Call us on 020 7692 8456
Or email info@iladvisory.co.uk
IL Advisory — Helping Directors Stay One Step Ahead.