Business Insolvency Test
Insolvency Test Results
Balance Sheet Test-
Net Assets/Liabilities-
Cash Flow Test-
Cash Shortfall (30 days)-
Monthly Burn Rate-
Overall Assessment-
Insolvency Options for UK Companies
| Option | Purpose | Typical Cost |
|---|---|---|
| CVA | Restructure debts, continue trading | £5,000–£15,000 |
| Administration | Protection from creditors | £10,000–£50,000 |
| Liquidation (CVL) | Close company, distribute assets | £4,000–£8,000 |
| Pre-pack Admin | Quick sale of business | £8,000–£25,000 |
| Dissolution | Strike off (no debts) | £33 |
Key Thresholds
Statutory Demand
£750+
Winding-Up Petition
£750+
CVL Cost
£4k–£8k
How to Use This Calculator
1
Enter total assets
Include all company assets: cash, debtors, stock, equipment, property at current market values.
2
Enter total liabilities
Include all debts: trade creditors, loans, HMRC, employee claims, contingent liabilities.
3
Enter cash position
Input available cash and debts due within 30 days for the cash flow test.
4
Enter monthly figures
Revenue and costs show whether the business can trade out of difficulty.
5
Review assessment
The calculator runs both the balance sheet test and cash flow test to determine insolvency status.
Frequently Asked Questions
What is the balance sheet test?
A company is balance sheet insolvent if its total liabilities exceed its total assets. This includes contingent and prospective liabilities. Directors must consider the company's realistic asset values, not book values.
What is the cash flow test?
A company is cash flow insolvent if it cannot pay its debts as they fall due. This is the more commonly applied test. Even profitable companies can be cash flow insolvent if they have timing mismatches between income and expenditure.
What are directors' duties when insolvent?
Directors must act in the best interests of creditors (not shareholders) once they know or should know the company is insolvent. Continuing to trade while insolvent can lead to personal liability for wrongful trading under Section 214 of the Insolvency Act 1986.
What is wrongful trading?
Wrongful trading occurs when directors continue to trade a company they knew (or should have known) had no reasonable prospect of avoiding insolvent liquidation. Directors can be held personally liable for company debts incurred after that point.
What is a CVA?
A Company Voluntary Arrangement (CVA) allows an insolvent company to agree a payment plan with creditors, typically paying a proportion of debts over 3-5 years while continuing to trade. It requires approval from 75% of creditors by value.
How quickly should I act?
Immediately. Once you suspect insolvency, seek professional advice from a licensed Insolvency Practitioner within days, not weeks. Delay increases the risk of wrongful trading claims against directors.
Official Sources & References
Data verified against official UK government sources. Last checked April 2026.