If your company is close to liquidation, it can be hard to know whether to finish work or stop straight away. You may want to protect your reputation, avoid letting customers down, pay staff, reduce losses and do the right thing.
But once insolvency is clear, the decision changes. You need to think carefully before you carry on. In many cases, you should stop trading before liquidation. In some cases, finishing limited work may be reasonable. The key is to document the decision and take advice before continuing.
Quick Answer: Should You Stop Trading Before Liquidation?
If the company is insolvent and there is no realistic prospect of recovery, you should normally stop trading before liquidation. You should also avoid taking on new debts, accepting new orders or making promises the company may not be able to keep.
That does not always mean every job must stop instantly. There may be limited situations where completing work protects value, reduces creditor losses or avoids creating a worse outcome.
For example, it may be reasonable to finish a small job if:
- the work is almost complete
- no new credit is needed
- the customer has already paid
- staff and suppliers can be paid for the remaining work
- completing the job is likely to reduce the company’s overall liabilities
Even then, you should take advice first. You should also keep a clear written record of why you decided to continue.
The main risk is that continuing to trade could make creditors worse off. If you are unsure, read our guide to the risks of trading while insolvent and speak to us before making a final decision.
Why This Decision Matters
When a company is solvent, directors usually focus on the success of the business and its shareholders. When a company becomes insolvent, the focus changes. Your duty shifts towards protecting creditors.
A company becomes insolvent if cannot pay its debts when they fall due, or has debts greater than the value of its assets. In this scenario, directors should protect company assets, treat creditors fairly and avoid worsening creditors’ financial position.
This is why “finish the job or stop trading?” is not just a commercial question. It is also a question of director duties.
Wrongful trading is one of the main concerns. Under Section 214 of the Insolvency Act 1986, a director can face personal financial consequences if they continued trading when they knew, or should have known, there was no reasonable prospect of avoiding insolvent liquidation and did not take every step to minimise potential loss to creditors.
That does not mean you should panic. It means you should pause, take advice and document what you do next.
Deciding whether to continue work or stop trading? Our licensed insolvency practitioners can help. Contact Anderson Brookes for a free, confidential assessment: call 0800 1804 935 or email advice@andersonbrookes.co.uk.
Case 1: The Job Has Been Paid For
This is one of the most common worries. In some cases, a customer has paid upfront and the work is booked in. You want to finish it because it feels fair. You may also worry that stopping will lead to complaints, refund requests or legal action.
Completing the work may be possible, but it is not automatically safe.
Ask yourself:
- Can the company complete the job without taking on new debt?
- Are the materials already paid for?
- Can staff, subcontractors and tax liabilities linked to the job be paid?
- Would completing the work leave creditors better off or worse off?
- Has the money already been used elsewhere?
If the customer has paid and the job can be completed at little or no extra cost, finishing it may reduce the customer’s claim as a creditor. That can sometimes support the decision to continue.
But if the company must spend money it cannot afford, order materials on credit or delay paying other creditors to finish that job, the position becomes much more risky.
You should not simply choose the loudest customer, the most important customer or the customer most likely to complain. Once insolvency is clear, you need to consider creditors as a whole.
Before you continue, write down the reason. Record the customer payment, the remaining cost, the likely outcome and the advice you received.
Case 2: The Job Is Partly Complete
Partly completed work can feel even harder. Stopping immediately may waste work already done. Continuing may involve more cost.
This is where a short written decision record can really help.
You should consider:
- How much work is left
- What it will cost to finish
- Whether any new credit is needed
- Whether the customer will pay more
- Whether stopping would create a larger claim
- Whether completion benefits creditors overall
For example, if a job is 95% complete and the final work can be done using materials already owned by the company, the decision may be different from a job that is only 30% complete and needs more labour, new stock and supplier credit.
Do not rely on instinct alone. It is easy to make a decision based on reputation, stress or pressure from customers. Those are human concerns, but they are not enough on their own.
If you are close to liquidation, the safer approach is to take advice before continuing and keep a note of the reasoning.
Case 3: The Job Needs New Materials
A job that needs new materials is usually higher risk.
If the company has to order materials on credit when liquidation is likely, that can create a new unpaid creditor. This is exactly the type of situation directors need to avoid.
Even if you plan to pay for materials upfront, you still need to ask whether using that cash is the right thing to do. Could the money be needed for wages, HMRC, existing suppliers or liquidation costs? Would spending it on one job unfairly prefer one creditor or customer over others?
This does not mean materials can never be bought, but the decision needs care.
Before buying materials, ask:
- Is the purchase essential?
- Can it be paid for immediately?
- Will it create any new debt?
- Is there a clear benefit to creditors overall?
- Has an insolvency practitioner reviewed the position?
If the answer is unclear, stop and take liquidation advice before placing the order.
Case 4: Staff or Subcontractors Are Needed
If you need staff or subcontractors to complete work, you need to be careful about whether they will be paid.
Asking people to continue working when the company may not be able to pay them is a serious warning sign. The same applies to subcontractors, freelancers and agencies.
You should also think about related costs, such as PAYE, National Insurance, pension contributions, holiday pay and expenses. A job may look profitable until these costs are included.
If a company cannot pay wages, tax or subcontractor invoices when due, continuing work can increase losses. It may also create more stress for everyone involved.
In many cases, a CVL may be the most responsible way to bring an insolvent company to an orderly close. A licensed insolvency practitioner can explain what happens to employees, creditors, assets and unfinished work.
At Anderson Brookes, we help directors understand this before they make decisions that could increase risk.
Case 5: Customer Deposits
Customer deposits need careful handling.
A deposit does not always mean the money is sitting separately waiting to be returned. It may have been used to buy stock, pay staff or cover business costs. The legal position can depend on the contract, how the payment was described and how the money was handled.
If the company cannot supply the goods or services, the customer may become a creditor for the amount owed.
Taking new deposits when you know the company is likely to fail is very risky. It can make creditors worse off and may lead to criticism later.
Before accepting or using deposits, consider:
- Can the order realistically be fulfilled?
- Will any new debts be created?
- Has the customer been given a fair picture?
- Is the company already insolvent?
- Would taking the deposit make the position worse?
This is especially important in sectors where customer payments, stock and supplier credit are closely linked. In retail insolvency, for example, customer orders, deposits, refunds and stock can all become urgent issues very quickly.
If deposits are involved, take advice before continuing.
Red Flags: When to Stop
Some warning signs point strongly towards stopping trade.
You should usually stop trading before liquidation if:
- you need new credit to finish work
- suppliers will not be paid on time
- staff or subcontractors may not be paid
- HMRC arrears are increasing
- customers are paying deposits for work you may not complete
- you are choosing one creditor over others
- there is no realistic rescue plan
- continuing will increase the company’s debts
One red flag may be enough to pause. Several red flags mean you should get urgent advice.
Stopping does not mean you have failed. It may be the responsible step. It can protect creditors, reduce personal risk and give you a clear route forward.
How to Document Your Decision
If you decide to complete work, do not leave the reasoning in your head. Write it down; a simple note is often enough. It should explain what you knew at the time and why you believed the decision protected creditors.
Include:
- The company’s financial position
Note the current bank balance, unpaid debts, creditor pressure and any urgent liabilities. - The job details
Record the customer, contract value, amount paid, amount outstanding and stage of completion. - The remaining cost
Include materials, wages, subcontractors, delivery, tax and any other direct costs. - The creditor impact
Explain whether finishing the work is likely to reduce or increase creditor losses. - The alternatives
Note what would happen if the company stopped work immediately. - The advice received
Record who you spoke to, when you spoke to them and what was recommended. - The final decision
State whether you stopped, paused, completed limited work or entered a formal liquidation process.
This record does not remove all risk. But it shows that you took the issue seriously and made a reasoned decision.
Most importantly, take advice before continuing. Do not wait until after the work is finished.
Can You Take on New Work Before Liquidation?
In most cases, taking on new work when insolvent is much harder to justify than completing existing work.
New work often means new promises, new costs and new risk. You may need to pay staff, buy materials, use supplier credit or take deposits. If the company later enters liquidation and those people are left unpaid, your decision may be questioned.
There may be rare cases where new work is fully funded, low risk and clearly improves the position for creditors. But you should not make that call alone.
If liquidation is likely, speak to a licensed insolvency practitioner before accepting new orders.
Which Liquidation Route Might Apply?
The right route depends on the company’s position.
If the company is insolvent and cannot pay its debts, a Creditors’ Voluntary Liquidation is often the main option. It allows directors to take control of the closure process, appoint a licensed insolvency practitioner and deal with creditors properly.
Other types of liquidation may apply in different circumstances. A solvent company may use a Members’ Voluntary Liquidation. A creditor may force a company into compulsory liquidation if debts remain unpaid and legal action continues.
The key point is timing. If you already know the company cannot avoid insolvent liquidation, delaying can make things worse. Getting advice early gives you more control and helps you avoid decisions that may later be criticised.
Common Questions About Trading
Can I finish work after deciding to liquidate?
Possibly, but only in limited circumstances and only after advice. Once liquidation is likely, you should not carry on as normal. Any work completed should have a clear purpose, such as reducing creditor losses or preserving company value.
Can I take new orders before liquidation?
This is usually risky. If you take new orders knowing the company may not complete them, you could increase creditor losses. Take advice before accepting new work, deposits or customer payments.
What if the customer has already paid?
You still need to assess the position carefully. If the work can be completed without new debt and doing so reduces the customer’s claim, it may be reasonable. If completion requires more credit or unpaid labour, it may not be.
Can I pay one supplier so I can finish a job?
Be careful. Once insolvency is clear, you should avoid preferring one creditor over others unless there is a sound reason that benefits creditors as a whole. Take advice before making selective payments.
What happens if I stop work immediately?
The customer may become a creditor for unfinished work, refunds or losses. That can feel difficult, but stopping may still be the right step if continuing would make the overall position worse.
Will I be personally liable if I make the wrong decision?
Not automatically. Personal liability depends on the facts. The risk increases if you continue trading when there is no reasonable prospect of avoiding insolvent liquidation and creditors are made worse off. Taking advice and documenting decisions can help show that you acted responsibly.
Should I tell customers the company may enter liquidation?
This needs care. You should not mislead customers, but you should also take advice before making statements that could trigger wider consequences. An insolvency practitioner can help you decide what to say and when.
Don’t Make the Decision Alone
If you are wondering whether to finish the job or stop trading before liquidation, do not make the decision alone.
A short conversation can help you understand your duties, your options and the risks of continuing. It can also help you decide whether a CVL is the right next step.
At Anderson Brookes, we give calm, confidential and regulated insolvency advice. We will help you look at the facts, understand the likely impact on creditors and decide what to do next.
Before you accept more work, order materials, use customer deposits or ask staff to continue, speak to Anderson Brookes on 0800 1804 935 or by emailing advice@andersonbrookes.co.uk. We can help you make a clear, informed decision and move forward properly.