If your company is is insolvent, you could be held responsible for its debts if you have knowingly allowed the business to trade while insolvent or have given personal guarantees.
A winding up petition can be issued by anyone who is owed more than GBP750 by your company if they believe it is unable to pay its debts. The receipt of a winding up petition will have very serious consequences for the business. Once the petition is issued, it is usual for the company bank account to be frozen and significant restrictions are put on its ability to trade.
If the court agrees that the company should be wound up, a liquidator will be appointed and the business will be closed.
What are a Director’s liabilities
A company is wound up because it is unable to pay its outstanding debts and is therefore insolvent. Normally the directors will be protected from personal liability for company debt because of the rules of limited liability.
However, any director who has personally guaranteed a company loan will be held personally liable for repaying this.
Personal guarantees by directors are very common as the bank often will not provide credit without one. As such where a business is wound up, directors are often left responsible for repaying bank debts.
Risk of wrongful trading
One of the roles of the liquidator if a business is wound up is to investigate the conduct of the company’s directors.
Wrongful trading is where the directors allowed the company to continue to trade even though they knew it was insolvent, hence making the situation worse for creditors. Wrongful trading is one of the situations in which you as a director can be made personally liable for the company debt.
With the possible personal financial risk, clearly it is worth avoiding winding up if possible.
There are a number of strategies that you can employ depending on how you view the future of the business.
A company voluntary arrangement (CVA) can be used to write off 50% or more of the business debt and allowing the company continues to trade as normal.
Alternatively you could look at pre pack administration involving starting a new business which then buys the assets of the old and starts trading in its place without the burden of its debt.
You may in the end decide that the best course of action is to close the business. However, to give you the greatest amount of protection, this should be managed sensibly using the creditors voluntary liquidation process.
If you are a company director and you are threatened with a winding up order or have already received one, you need to act quickly both to save your business and protect your personal financial situation. Get Company Debt Advice now.
If you do not do this, and your business is closed, you could find that you are left to personally repay bank loans for which you have given personal guarantees.
If you are accused of wrongful trading you could become liable for other company debts as well. Your personal possessions such as your home may then be put at risk.
Obtain useful recommendations about forex trading online – please make sure to read this web site. The times have come when concise information is truly within your reach, use this possibility.