CVL vs administration vs strike off
Choosing how to close or rescue a company comes down to three questions: can it pay its debts, is the underlying business still viable, and do you need urgent protection from creditors. Answer them below to see the route most likely to fit, which a Licensed Insolvency Practitioner would then need to confirm.
Answer the three questions
Indicative guidance only. The right route depends on the full picture, which a practitioner will assess.
Strike off, CVL, administration or CVA: the decision tree
Three questions decide the route: solvency, viability, and how urgent the creditor pressure is.
- Can the company pay its debts?
- Yes, solvent
- Strike off (DS01). Solvent or dormant, no real debts. Cheap, but not while a petition is pending.
- No, insolvent
- Go to question 2.
- Is the underlying business still viable?
- No, not viable
- Creditors Voluntary Liquidation. An orderly, director-led close.
- Yes, viable
- Go to question 3.
- Need urgent protection from creditors, e.g. a winding-up petition?
- Yes, need protection
- Administration. The moratorium stops creditor action immediately.
- No, can repay over time
- Company Voluntary Arrangement. Directors keep control and repay over 3 to 5 years.
Indicative only; a Licensed Insolvency Practitioner confirms the right route for a company. Source: Insolvency Act 1986; Insolvency Service, gov.uk.
How the three questions decide it
A solvent, debt-free company can often be closed cheaply by strike off, while an insolvent one should not be. If the company is insolvent but the business is viable, administration or a Company Voluntary Arrangement may rescue it; if it is not viable, an orderly Creditors Voluntary Liquidation is usually the right close. Immediate creditor pressure such as a winding-up petition points towards the protection of administration, and it also rules out strike off: a company cannot apply to be struck off while a winding-up petition is pending (Companies Act 2006, section 1005).
Common questions
When is strike off the right route?
Strike off via DS01 is only suitable for a solvent or dormant company with no significant debts. If the company owes money, creditors and HMRC can object, and it does not clear the debts. See company strike off.
When is administration better than liquidation?
Administration suits a viable business that needs protection from creditors while a rescue or sale is arranged, because the moratorium stops creditor action. Liquidation simply closes the company. See administration.
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