The position on instruction
Technology and SaaS company failures follow a different pattern from traditional trading insolvencies. The asset base is intangible — intellectual property, codebase, customer data, brand. The cost structure is front-loaded — development cost is paid before revenue arrives. The market dynamics are non-linear — successful platforms scale exponentially, unsuccessful platforms run out of runway before reaching the scale that justifies the build cost. The procedural response to distress is correspondingly different from traditional sectors.
The first underlying case concerned a legal-technology platform launched in 2019. The platform connected users with lawyers, processed referrals on a commission basis, and provided business consultancy services alongside the core platform. The business was founded by a director with a business studies background and operated on a lean model — no employed staff, operations supported by a network of freelance contributors, and revenue generated through 10% commissions on referred lawyer engagements.
The second underlying case concerned a pet-care marketplace platform — a service connecting pet owners with dog walkers, sitters, and related providers. The platform had been launched in 2018 with backing from a connected international parent company. The model had shown promising commercial traction in 2019 before COVID-19 lockdowns collapsed demand by approximately 90% (pet owners were home and did not need dog-walking services). The platform never recovered to pre-pandemic volumes.
The analysis
Three structural features distinguish technology business failures from traditional sectors and shape the procedural response.
Feature 1 — Intangible asset base. Where a traditional company has stock, equipment, premises, and receivables, a technology company has code, IP, data, and goodwill. These can have substantial value, but the value is fragile. A platform that depends on a single key developer collapses when that developer leaves. A codebase that has been allowed to fall behind framework versions becomes unmaintainable. Customer data that has not been kept current loses commercial value within months. Where there is value to preserve in a tech failure, it must be preserved quickly or it dissipates.
Feature 2 — Front-loaded cost structure. Traditional businesses fail when ongoing operating costs exceed ongoing revenue. Technology businesses fail when accumulated development cost cannot be recovered from future revenue at any plausible level of scaling. The difference matters procedurally because the assessment of viability under a CVA framework is not just about ongoing cashflow — it is about whether the platform can generate enough revenue over a realistic period to amortise the historic investment as well as funding future development.
In each of the underlying cases, this test failed. The legal-tech platform's commission revenue was insufficient to fund the AI integration costs and the platform redevelopment required when the key developer departed. The pet-care platform's commission revenue, even at recovered post-COVID volumes, would not have funded the platform maintenance cost over the period needed to repay the historic build.
Feature 3 — Founder dependency and key-person risk. Technology businesses are routinely dependent on one or two key technical individuals — typically a lead developer, sometimes the founding CEO. Where those individuals leave, the platform's ability to continue functioning and evolving is materially compromised. In the legal-tech underlying case, the departure of the freelance lead developer left the platform incomplete and non-functional, requiring a full rebuild that the company could not fund.
The strategy adopted
The strategy in each case was framed around three points: honest assessment of platform value (was there continuing value in the IP, brand or customer base that could be realised through sale to a third party or connected purchaser?); the procedural framework for the sale (administration where a sale could be effected on appointment day, CVL where platform value had degraded beyond meaningful sale value); and connected-party sale compliance (where the proposed purchaser was connected to the existing directors, the SIP 16 disclosure framework and the Connected Persons Regulations 2021 applied — compliance was not optional and was central to creditor and regulator engagement).
For the legal-tech business, the analysis identified that the platform's commercial value was substantially diminished by the lead developer's departure. A sale of the substantive assets to a connected party (a related company controlled by a family member of the founding director) was proposed at the value supported by independent expert valuation. The SIP 16 marketing and disclosure requirements were complied with; the connected sale was disclosed in detail to creditors and to the Pre-Pack Pool. The sale completed on the administration appointment day with the connected purchaser taking the residual assets at the valuation amount.
For the pet-care platform, no realistic going-concern sale was achievable. Post-COVID demand had not recovered, the platform required ongoing development investment that no third-party purchaser would fund, and the connected international parent had no commercial interest in continuing UK operations. CVL was the right procedure. The platform assets (codebase, customer data, brand) were realised by the liquidator at modest value through a structured marketing process, with the proceeds distributed to creditors.
Execution
The legal-tech administration proceeded over six weeks from initial instruction to completion of the connected party sale. The principal procedural workstreams were the independent valuation, the SIP 16 marketing process (which confirmed no third-party purchaser was willing to bid above the connected party valuation), the Pre-Pack Pool referral, the Connected Persons Regulations 2021 statement, and the administrator's report to creditors. The administrator's report contained detailed disclosure of the connected relationship, the marketing process, the valuation methodology, and the rationale for accepting the connected bid.
The pet-care liquidation took longer — approximately ten months — because the asset realisation required a structured marketing process for the platform assets. Several potential acquirers expressed interest at low valuations; ultimately the realisable value was modest but exceeded the costs of marketing. The liquidator's investigations under SIP 2 confirmed no conduct concerns; the director had taken professional advice when the platform's commercial position became unsustainable and had cooperated fully with the appointment.
In both cases, the directors retained the goodwill of the founding vision but were free of personal exposure. Personal guarantees on bounce-back loans were addressed separately — in the legal-tech case, no BBL had been taken; in the pet-care case, the BBL had been fully repaid before insolvency.
The outcome
The procedural outcomes were both regulatorily clean and commercially appropriate to the facts. The legal-tech platform's assets continued under the connected purchaser, preserving such operational value as remained and providing employment for the founder under the new vehicle. The pet-care platform was wound up in an orderly manner, with creditors receiving the distribution the asset position supported.
From the directors' perspective, the outcomes preserved their personal positions and their professional reputations. Neither faced CDDA proceedings. The legal-tech director continued in the technology sector under the connected purchaser's vehicle. The pet-care director moved into a different commercial role within the UK technology ecosystem.
Takeaways for directors of distressed tech companies
- ›Technology businesses fail differently from traditional businesses, and the procedural response must reflect that. The viability test is not just about ongoing cashflow but about whether accumulated development cost can be recovered from future revenue at any plausible scaling.
- ›Intangible asset value degrades fast in tech failures. Where there is value to preserve, the procedural decision must be taken quickly. Delayed action — particularly delayed action where the lead technical staff have departed — typically destroys the value that an earlier intervention could have preserved.
- ›Connected party sales are common and legitimate in tech failures because the value of the assets is intertwined with the founding team's continuing involvement. The procedural framework for connected sales — SIP 16 marketing, independent valuation, Pre-Pack Pool referral, Connected Persons Regulations 2021 disclosure — is detailed and must be complied with strictly.
- ›Personal guarantees in tech companies are typically lighter than in traditional businesses because the asset base does not support meaningful secured lending. Where personal guarantees do exist, they are typically on bounce-back loans and software licensing contracts. Settlement is often achievable but is a separate workstream from the corporate insolvency.
- ›Directors of failed tech companies are routinely able to continue in the sector after insolvency. The procedural and reputational outcome depends on prompt engagement and on the choice of right procedure for the facts. CVA is rarely the right tool for early-stage tech failure; administration and CVL are the more common procedural routes.