When the Insolvency Act was introduced in 1986, it was bold, modern and wide-reaching. At the time, so was I – I’d just joined the profession full-time. Both of us had our futures ahead of us.
Forty years on, I’m still here. So is the Act. The difference is: I’ve had to evolve.
The economy, the workplace, and the nature of business have all changed beyond recognition. But insolvency law, for the most part, hasn’t. And that creates real problems for real people.
🏢 Then and Now: The Companies We Deal With
In 1986, most insolvency cases involved traditional businesses – shops, manufacturers, construction firms, and partnerships with staff, stock, premises, and paper trails. Insolvency was relatively rare. Directors were often older, more experienced, and – I’m sorry to say it – better advised.
Today? We’re seeing micro-entities with no employees, no office, no stock, and no profits – but with complex clod / digital assets and real-world liabilities. We’re seeing directors in their twenties who became company owners almost by accident. And we’re seeing over 900,000 one-person limited companies live in the UK right now – something that barely existed in the ’80s.
The problem is that the law still treats these modern micro-businesses like the traditional firms of the past.
⚖️ Insolvency Law Is Still Built on Outdated Assumptions
Despite all the workplace change, insolvency law continues to assume that:
- A company has employees – on PAYE -with rights to claim.
- There are physical assets to recover and sell.
- Directors are financially literate and legally informed.
- Control rests with the board, not the platform, algorithm, or funder.
- Failure means a factory closure or cashflow collapse – not a Stripe, Paypal or Shopify account frozen by AI.
None of these assumptions hold true across the modern economy.
We’re regularly dealing with:
- Directors who are their own only employee.
- Contractors who think IR35 is a postcode.
- ‘Businesses’ that are just a laptop, a subscription, and a dream.
- Redundancy claims where there was never an employment contract.
And yet the paperwork, processes, and penalties haven’t adapted.
👤 The Unqualified Director Problem
Here’s a truth we don’t talk about enough: there’s no minimum qualification, training, or continuing professional development (CPD) requirement to become a company director in the UK.
None. Zip.
There are more legal restrictions on owning a gerbil than there are on running a limited company.
So it’s no wonder so many directors come to me utterly unaware of their duties under the Companies Act, the Insolvency Act, or their personal risk when things go wrong. Most aren’t entrepreneurs or professional business leaders. They’re technicians, good at what their company does, whether that’s plumbing, graphic design, or social media marketing.
They’re not trained to read balance sheets, forecast cashflow, or spot early signs of insolvency. But when their company fails, we’re forced to shoehorn them into a 40-year-old procedural regime that was never designed for people like them.
And then we wonder why they – and the organisations ansd people they deal with – don’t engage, don’t understand, or feel unfairly treated.
🔄 CVLs: Still Fit for Purpose?
Let’s ask a difficult question.
Are Creditors’ Voluntary Liquidations (CVLs) still fit for purpose?
They remain the most common business closure route in the UK. And yet, the CVL process today is strikingly similar to what it was in 1986 – despite massive changes in the structure and methods of Great British business, the speed of communication, and the expectations of stakeholders.
CVLs were designed in an era when:
- Companies had physical creditors’ meetings.
- Most directors were employer-owners.
- Creditors were banks, trade suppliers, and HMRC.
Today, we use CVLs for:
- One-person marketing agencies operating from a spare bedroom.
- Directors who’ve barely made minimum wage.
- Businesses with few, if any, creditors that will see any return.
Yet we still:
- Appoint liquidators via virtual procedures most stakeholders ignore.
- Produce reports that read like a procedural checklist, not an explanation.
- Navigate red tape that makes the process slow, expensive, and often irrelevant to the very people it’s supposed to serve.
CVLs can and do serve a valid purpose. But should we really be building entire firms around a model that has barely evolved in 40 years? Or should we be asking what directors, creditors and regulators actually need in 2025 – and rebuilding from there?
🧩 Are We Really Giving Directors the Best Advice?
We also need to ask – are directors who are told to fund a CVL from their own pocket, often borrowing from family or friends just to do so, really being given the best advice?
They’re being asked to pay for a formal insolvency process that was never designed for people in their position. In many cases, they’re:
- Technicians, not entrepreneurs.
- First-time directors with no training.
- Emotionally exhausted and financially drained.
- Hoping that by doing ‘the right thing’, it will all somehow make sense.
But where is the learning? The reflection? The protection against recurrence?
A formal CVL process does very little, if anything, to help these directors understand:
- What went wrong in the first place.
- How to avoid it happening again.
- What skills, support or systems they might need next time.
We talk about director conduct, but we rarely talk about director growth.
Surely, in 2025, we can do better than just funnelling small business owners into a 1986 process and walking away. We should be offering early intervention, alternative closure routes, learning mechanisms, and recovery frameworks that meet them where they are – not where the law assumes they’ll be.
🧨 What Is the Point of the CVL Factories?
And while we’re asking hard questions – what exactly is the point of the CVL factories?
What public good are they serving?
Many seem built not to help businesses recover or individuals rebuild – but to extract fees from failure. The only clear beneficiaries are the owners of those firms. For the directors paying for the process, the creditors who recover nothing, and the public watching from the sidelines – it can look like a drain on society, not a solution.
And what is that doing to the reputation of those in the insolvency sector who are working hard to deliver real value, real support, and real outcomes?
We can’t build trust in our profession if the loudest signals the public sees are advertised CVLs for £1,000 on Facebook and other social media and a phone call with someone who’ll never appear on the final report.
It undermines us all.
🎯 The Law Doesn’t Fit the Risks
Take wrongful trading. Or preference claims. Or director disqualification threats. The rules are built for those with power, information, and choice.
But many of today’s directors are isolated, unsupported, and unaware. They may not even know they’re insolvent until a client cancels, an electronic payment is withheld, or a loan call arrives.
They’re often:
- Technically in breach, but morally trying to do the right thing.
- Expected to act like legal experts – when they’ve never spoken to a lawyer.
- Navigating processes designed for accountants – when they don’t even have one.
That’s not fair. And it’s not effective.
⌛ 40 Years, Minimal Change
In 40 years, we’ve seen:
- The rise of personal service companies.
- The birth of the gig economy.
- Remote work and platform-dependent incomes.
- Globalised services and digital-only businesses.
But the Insolvency Act still relies on old structures, old definitions, and old expectations.
We need to ask: What is insolvency law really for?
To protect creditors? Then let’s acknowledge that today’s creditors are just as likely to be freelancers, casual suppliers, or platforms – not banks, trade creditors or landlords.
To protect employees? Then let’s accept that many micro-companies often have none.
To penalise bad directors? Then let’s distinguish the wilfully dishonest from the unadvised and overwhelmed.
🧠 What Needs to Change?
Here’s what modern insolvency law – and our profession – should start talking about:
- Tailored procedures for micro-entities and one-person companies.
- Digital-first communication, claims and realisations.
- Legal recognition of digital assets, data, brand, and goodwill as real value.
- Greater emphasis on education and early advice, not just penalties.
- Platform accountability – where the business model depends entirely on them, they can’t be passive observers.
- A serious reckoning with the CVL production-line model that risks doing more harm than good.
💬 A Call for Modernisation
Forty years in this profession has shown me that people matter more than process. But the current system often puts process first.
We cannot keep pretending that one-size-fits-all insolvency law works. It doesn’t. And it’s the smallest companies, the most vulnerable directors, and the least protected stakeholders who suffer most.
We need to talk honestly – not just about who our profession serves, but about whether the law we work within is still fit for purpose.
Because insolvency isn’t just about closing companies – it’s about recognising when systems themselves need a rethink.
Part of my series: “’0 Years in Insolvency – Now Let’s Talk Honestly’
#InsolvencyLaw #CVLs #DirectorAdvice #Reform #InsolvencyProfession #Modernisation #EthicalInsolvency