What happens after a company is liquidated?
“A man in the pub told me that if I liquidate my company, I cannot be a director of any other company. Is this correct?”
NO, that is not correct! This nonsense just goes to show how people make up stories about subjects they know nothing about all the time. As a result of this nonsense, many struggling directors are concerned about liquidating their company because they believe it will negatively impact them personally. What do you think? Listening to bartenders, inexperienced accountants, lawyers, or marketing people can prevent decisions from being made; it is this failure to make a decision that could land you in trouble.
So, how will this affect me, and how long will it take?
A limited liability company means that the directors face little risk (or limited liability) if the company fails, as long as they acted correctly and on time. Furthermore, if you have been compliant and on the payroll as a director for many years, you can actually claim redundancy from the government like any other employee. However, and this is a big but, if you fail to act on time, act reasonably, keep books and records, and continue to take credit KNOWING that the company cannot possibly repay it, you ARE at risk of personal financial loss or worse, such as losing your house. So, act now to get assistance for your company and, more importantly, to begin reducing your own risks.
The action described above can be considered wrongful trading; if a liquidator can prove there was wrongful trading, your personal risk increases significantly. You may be held personally liable for the company’s debts. Taking credit from a supplier or taking deposits from customers when you know you won’t be able to pay them back is a classic example of wrongful trading.
The quickest and most efficient way to deal with an insolvent company with no future is voluntary liquidation. You are at risk as a director of an insolvent company if you do not act. This risk INCREASES the longer you wait to liquidate the company.
If you fail to act and the company is eventually wound up by creditors (compulsory liquidation), the Official Receiver (OR) will be appointed to liquidate the business and will investigate the activity of the directors and the business over the last 2-3 years. This is known as a director’s conduct report.
Did you know that if the OR determines that the directors knowingly traded while insolvent and failed to act, took credit with no reasonable prospect of repaying the debts, failed to submit accounts, or committed a number of other offences, you may face PERSONAL action? Did you know that directors can be held personally liable for the company’s debts from the start of insolvency?
This is known as “lifting the veil of incorporation,” and it protects directors by limiting their liability. If this occurs, you may be held liable for PAYE, VAT, and creditors’ monies from the time you should have known the company had no reasonable chance of surviving the problems it was facing.
Furthermore, the directors may face disqualification proceedings for up to 15 years under the Company Directors Disqualification Act 1986, as well as fines and the loss of personal assets such as your home, or even personal bankruptcy.
Look, if you as directors acted naively, you may not have realised that you had violated these laws, but now that you do, it is critical that you protect yourself as a director by acting quickly to cease trading and place the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are resolved.
What exactly is Creditors Voluntary Liquidation and what does it imply for me?
In short, liquidation usually means, the company’s trading stops and it’s assets are turned into cash or “liquidated”.
All other potential liabilities, such as employment liabilities, landlord’s rent, or lease payments, are halted. It is truly the end of the company, but if a phoenix is organised, the “business” may survive. Liquidation is a powerful tool for removing creditor pressure and allowing you to move on with your life.
What if I made personal guarantees?
If you signed personal guarantees or indemnities to lenders, the liquidation may result in them being called in if the bank is unable to recover its money from the company. There is little you can do about it, but you should not postpone decisions on liquidation to avoid having to call in a PG: imagine having ALL of the company’s debts fall on your shoulders. It should also be noted that HMRC has now surpassed floating charge holders in any liquidation since December 2020. As a result, lenders that you have personally guaranteed may receive less recovery, exposing you to greater risk.
All banks will agree to a repayment plan for the PG if you work with them to reduce their risk.
One excellent piece of FREE advice: always ensure that ALL tax returns, VAT returns, and annual returns have been completed and submitted, as well as that other “compliance” issues have been addressed wherever possible. These are critical procedures that will protect you as individual directors. It demonstrates that you have been acting appropriately.
I’ve heard that directors in liquidation can claim redundancy.
If you were employed by the company and received PAYE payments, you will be able to claim redundancy from the government. This is a very simple process (20 minutes to fill out a form, which we can assist with), so there is no need to hire a third party to make a claim. This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough “paperwork”. The risk isn’t worth it. If it sounds too good to be true, it most likely is!
You should learn more about your options. This is clearly a general guide, so if you have any concerns, please call us and we will talk you through the situation free of charge and with expert guidance for your specific situation. Contact one of our advisors or, if you prefer, one of our IPs (insolvency practitioners) right away:
Why not dial 08009700539 or 020 7887 2667 right away?
We could assist you in starting the liquidation process right away.
(8.15 a.m. to 5.00 p.m.; after hours, call 07833 240747, Wayne Harrison (IP) or Eric Walls (IP) on 07787 278527)
Finally, please keep in mind that NO BUSINESS is worth jeopardising your health, relationships, marriages, or children over. Act properly, listen to advice, solve the problem, and then move on with your life. The stress will fade after a while, and you will be able to focus on more important matters.
We are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue, and company rescue, and we can assist you in resolving your problems if you contact us. Call 0800 9700539 for assistance.