“Last Call”: Your Options Before the Pub Doors Close
British pubs are woven into the fabric of local life in the UK.
However, rising business rates, higher national insurance costs, increased minimum wage obligations and general inflationary pressures, together with lower footfall, have squeezed margins across the industry. An analysis of official government statistics by tax specialists at Ryan shows that 366 pubs were either demolished or converted to alternative uses in the 12 months to December 2025. These losses reduced the total number of pubs, inclusive of vacant sites, from 38,989 to 38,623 across England and Wales.
For pub owners faced with the threat of insolvency, it is imperative that you understand your obligations to creditors and employees. Any delay in seeking legal advice, especially if you are a company director, might increase your liability and reduce your chances of an orderly wind-down.
Under the Insolvency Act 1986 and Companies Act 2006, directors must take creditors’ interests into account where insolvency is probable or imminent. Continuing to trade when there is no reasonable prospect of rescue can expose directors to wrongful trading claims under section 214 of the Insolvency Act 1986. This can result in personal liability for losses incurred during the period of wrongful trading and, in serious cases of misconduct, director disqualification or other sanctions.
Personal Guarantees and Secured Creditors
It is common practice for pub operators to enter into a lease agreement or borrowing arrangement that includes personal guarantees. This essentially means that if a business fails, lenders are able to pursue the guarantor personally for any outstanding debts.
What should directors do?
Where it becomes apparent that the company has no realistic prospect of avoiding insolvency, directors should consider the following options:
1. Creditors’ Voluntary Liquidation (CVL)
A CVL is appropriate where a company is insolvent and there is no realistic prospect of rescue.
It is a director-initiated, shareholder-approved statutory process, under which:
- directors take steps to place the company into liquidation
- shareholders approve the decision
- a licensed insolvency practitioner is appointed as liquidator
- the liquidator takes control of the company, realises its assets, and distributes funds to creditors in the statutory order of priority
Entering into a CVL at the appropriate time can help directors demonstrate that they are taking steps to minimise losses to creditors.
Compared to compulsory liquidation (where a creditor applies to court), a CVL generally allows greater control over timing and the choice of liquidator.
2. Administration (including Pre-pack Sales)
Administration is a formal insolvency process in which an administrator is appointed to take control of the company, displacing the directors.
The purpose of administration is to:
- rescue the company as a going concern, or
- achieve a better outcome for creditors than liquidation
In practice, the administrator may continue trading the business, restructure operations, or market the business for sale.
In some cases, the business or its assets may be sold as a going concern.
A pre-pack administration involves negotiating a sale prior to the administrator’s appointment and completing it immediately afterwards. This approach is often used to preserve value and maintain business continuity.
Administration may be appropriate where there is still a viable business, even if the company itself cannot be saved.
3. Moratorium
Under the Corporate Insolvency and Governance Act 2020, companies that are or may become insolvent can apply for a moratorium.
This provides a short-term breathing space (typically 20 business days), during which creditor enforcement action is restricted.
During this period:
- directors remain in control of the company
- a licensed insolvency practitioner acts as a monitor, overseeing the process
The moratorium can be extended and is intended to provide time to explore restructuring options where there is a realistic prospect of rescue.
Choosing the right option
The appropriate course of action will depend on the company’s financial position:
- No realistic prospect of rescue → CVL
- Viable business remains → Administration
- Short-term protection needed → Moratorium
Early advice is key to identifying the most appropriate route and reducing potential exposure.
The challenges facing the UK pub sector are significant and, for some operators, unavoidable. But the decisions made in the weeks and months before a business becomes insolvent can have profound legal and financial consequences.
If you are a pub owner or director facing financial distress or closure, early legal advice is essential. For confidential guidance on insolvency risk, director duties and dispute resolution, please contact our litigation team.