Why early insolvency advice matters amid greater scrutiny in 2026

The UK insolvency landscape is changing quickly. For directors and their advisers, financial distress is no longer only a balance sheet issue. It is increasingly a question of governance, compliance and conduct.

This matters because seeking advice early can preserve options. It may help protect value, support directors in meeting their duties, improve communication with stakeholders and reduce avoidable personal or commercial risk.

Several developments in 2026 point in the same direction: greater transparency, closer scrutiny and an increased need for decisions to be supported by clear evidence. Against a backdrop of higher costs, funding pressure, supply chain disruption and fragile demand, waiting too long may narrow the options available to a business and its stakeholders.

Greater scrutiny of investigations and decision-making

Statement of Insolvency Practice 2, usually known as SIP 2, sets expectations for how insolvency practitioners investigate the affairs of an insolvent company. Proposed updates to this are currently under review.

Proposed updates to SIP 2 place greater emphasis on proportionate investigations, likely recovery prospects and the commercial use of money available to the insolvent estate. In practice, creditors should expect investigation work to be more clearly targeted and supported by evidence.

For directors and advisers, the change reinforces the importance of maintaining complete records and being able to explain the decisions made while a business was experiencing financial pressure.

Better corporate information and stronger compliance expectations

The Economic Crime and Corporate Transparency Act 2023 is also reshaping the corporate environment. Companies House has stronger powers and identity verification is becoming more established. Better corporate information may support asset tracing, misconduct claims and earlier assessment of risk.

Anti-money laundering and sanctions compliance remain significant risk areas. The proposed move towards a single anti-money laundering supervisor, the Financial Conduct Authority, would represent a more centralised approach and reinforce the need for robust onboarding and complete checks.

Solvent liquidations can still involve risk

The Novalpina case is a reminder that even a solvent liquidation can still end with unwanted implications for directors. Where creditors are not settled with within 12 months, a company may be forced into insolvent liquidation even where the asset position is positive.

Seeking advice from an IP at an early stage of the winding down process helps avoid unexpected issues which could have been mitigated with a clear understanding of the end goal before critical decisions are made.

When might insolvency advice be valuable?

It may be helpful to seek advice before a formal insolvency process becomes unavoidable. Warning signs may include:

• increasing creditor pressure or demands for payment;
• recurring cash flow shortages or difficulty meeting liabilities as they fall due;
• concerns from lenders, shareholders or other stakeholders;
• uncertainty about directors’ duties or the quality of board records;
• disputed claims, guarantees or difficult-to-realise assets;
• questions about whether a proposed restructuring is achievable;
• concern that a solvent liquidation may no longer proceed as expected.

Early advice does not automatically mean entering a formal insolvency process. Depending on the circumstances, it may involve an initial options review, contingency planning or support in evaluating a restructuring proposal. The appropriate approach will depend on the financial position of the business and the interests of its stakeholders.

Where a formal process is required, we advise on administrations, creditors’ voluntary liquidations, solvent liquidations and other insolvency procedures.

How Moore Kingston Smith can help

Moore Kingston Smith’s insolvency practitioners are regulated by ICAEW and combine technical knowledge with practical commercial judgement. Seeking advice early can help businesses understand their options, manage risk and make well-evidenced decisions.

We provide directors with clear advice on their duties, risks and available options, while helping creditors understand potential recovery and the likely outcomes. We also work closely with lawyers, lenders, accountants and other professional advisers to provide practical advice tailored to their clients’ circumstances.

Where needed, our insolvency team can draw on Moore Kingston Smith’s tax, corporate finance, forensic accounting, audit, HR and wider advisory expertise, allowing financial, operational and stakeholder issues to be considered together. Whether you are responding to creditor pressure, considering restructuring options, dealing with stakeholder concerns or assessing the viability of a solvent liquidation, an early conversation can help clarify the position and preserve available options.