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When a company begins to experience financial pressure, directors are often uncertain about where to seek advice first. Should they speak to a lawyer or an insolvency practitioner (IP)? In reality, both play important but different roles, and the right answer depends on the nature of the problem the company is facing.
The Role of the Insolvency Practitioner
An insolvency practitioner is a licensed professional who specialises in businesses experiencing financial distress. Their focus is primarily financial and commercial. An IP will assess whether a company is solvent, approaching insolvency, or insolvent, and explain the implications of that assessment for both the business and the directors’ duties.
IPs advise on issues such as cashflow pressure, creditor arrears, covenant breaches, and concerns around wrongful trading. They can also implement formal restructuring or insolvency processes, including administration, liquidation, or company voluntary arrangements (CVAs). For many directors, speaking to an IP early provides clarity on whether the business has viable options or whether formal insolvency is likely.
Importantly, an initial discussion with an IP can often reassure directors who are worried about personal liability. In many cases, there is no immediate concern, particularly where directors have acted responsibly, kept proper records, and sought advice promptly. Where risks are identified, an experienced IP will flag them early.
The Role of the Legal Adviser
Lawyers, by contrast, focus on legal rights, obligations, and risk. A solicitor or barrister will interpret contracts, shareholder agreements, financing documents, and governance arrangements. They advise on director duties, personal liability, regulatory exposure, and disputes or litigation.
Legal advice is particularly important where the issue is contractual or contentious in nature, for example, where a lender is enforcing security, a counterparty is threatening proceedings, or there is uncertainty over contractual rights and obligations. Lawyers also play a key role where there are allegations of misconduct, challenges to transactions, or potential claims against directors.
When to Speak to Whom – Practical Examples
In practice, the question is often not “IP or lawyer?”, but which discipline is best placed to lead initially.
A director might speak to an insolvency practitioner first where:
- the company is struggling to pay its debts as they fall due;
- cashflow forecasts show a shortfall;
- creditor pressure is increasing;
- the board needs to understand insolvency risk and options.
A director might speak to a lawyer first where:
- there is a live contractual dispute or threatened litigation;
- lender enforcement or security issues are central;
- there are concerns about personal liability arising from specific transactions;
- governance or regulatory issues dominate.
Many situations involve both. In restructuring cases, it is common for an IP to assess the financial position and then work alongside lawyers where legal complexity arises.
A Balanced and Cost‑Effective Approach
From a practical perspective, many directors choose to speak confidentially with an insolvency practitioner at an early stage to understand the financial reality. If legal risks are identified, targeted legal advice can then be obtained. This staged approach can help control costs while ensuring the right expertise is brought in at the right time.
Ultimately, good outcomes are usually achieved where insolvency practitioners, lawyers, and accountants work collaboratively within their area of expertise to support directors navigating financial distress.
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Last Updated on 30 March 2026