Worried Director What Will Happen To Me After Liquidation?

The costs of liquidation start at around £4000 + VAT. This would be for liquidating a company with a single creditor, such as having an unpaid Bounce Back Loan (BBL) or HMRC. For more than one creditor issue, we would expect the fee to be approximately £4,400 - £6,000 plus VAT.

This is a question we get asked a lot. It is a legitimate concern for any director who may be finding that their business is not viable and they need to liquidate the company.  The ability to carry on with ones life without the episode hanging over you in the form of a poor credit rating is important.  Just because your company or business went into liquidation it doesn't mean you are a failure and it doesn't automatically change your credit score at the likes of Experian or Equifax. Limited Liability Setting up a company to do business is a risky endeavour and that is why there is the system of limited liability companies.  A limited company allows an entrepreneur to take risks without it impacting their own personal finances.However, it should be remembered that directors have duties to run a company in a fair and responsible manner.  The Companies Act says they should "exercise reasonable care, skill and diligence" . If a director does not do these things and the company becomes insolvent then there is the possibility of the "veil of incorporation" being lifted and exposing them to personal financial risk.  This will effect their credit rating in that the debts of the company could be passed onto them.   The Insolvency Act 1986 places a very specific duty on directors of insolvent companies to act in the best interests of creditors. The most obvious example here of trading that can have personal implications is wrongful or fraudulent trading. Wrongful trading is most characterised by taking money and deposits from customers knowing that you will be unable to repay them and you are just using that money to pay other creditors.Following Covid-19 companies were able to draw on government support in the form of Bounce Back Loans (BBLs) and other help, but the use of these funds will come under increasing scrutiny as banks start to demand repayments.  If you have used BBL for purposes other than for the company to "bounce back" then you could be at risk. How would my credit rating be affected by a company liquidation? Once a company goes into liquidation, the company ceases to exist and the directors duties cease.  This does not appear on your personal credit rating.  But if you try and raise credit for a different company of which you are a director it will be flagged.  The credit rating agency will say something like "exercise caution as the director has had previous company failures".  It is simply a case of once bitten twice shy.  Normally, this does not cause a problem if it happened just once but if you have had multiple failures it will be difficult for your company to raise credit, no matter how well it is doing.  Insurance companies are particularly picky on this point so you will probably pay a higher premium for business insurance. Overdrawn Directors Loan Account If you take money out of the business as dividends when the company is not making a profit you are in effect borrowing from the company.  This is not a problem if you are confident that you can get back into profit and pay it back. However, if the business goes into liquidation then it is possible that the liquidator will demand that you pay the money back. If you cannot do this then the liquidator may take legal action against you which will appear on your credit file and in some cases may make you bankrupt. What about getting a new job? If you have been a director of a failed company and you are applying for a high profile job in national security or finance then it is likely that it will be flagged in what would be called an enhanced credit check or a "vetting procedure".  Whether it would stop you getting work is impossible to say as it would be at the discretion of the employer. However, it would look better if you went into a creditors voluntary liquidation rather than just running down all the cash and waiting for a creditor to wind your business up.  I guess it would also not look good if HMRC lost large sums if you are applying for a job in national security or the government.Additionally, if you would like to liquidate your company, call us on 0800 9700539 or you can fill out a form on our www.liquidatemycompany.com website and get a quote in minutes. We can talk you through the process, organise the legal paperwork and begin proceedings.

What are the Advantages of liquidation Understanding the advantages of liquidation is crucial for ensuring you make the right decision for your company when it matters most.This helpful guide will tell you all about the key advantages of liquidation. But, first, we will take a look at the different types of liquidation.What is liquidation?Liquidation is a process that facilitates the closure of companies and apportioning of assets via agreement or litigation. There are three types of liquidation:Creditors' voluntary liquidation (CVL): The most common form of liquidation, CVL happens when your company can no longer pay its debts and you involve your creditors in the liquidation process. Compulsory liquidation: Your company is no longer able to pay its debts (often with creditors chasing significant late payments) and an application is made to court for the liquidation of the company. Members' voluntary liquidation (MVL): Your company is able to settle the debts currently in place, however you still want to close it.This article will focus primarily on the advantages of liquidation in relation to the creditors' voluntary liquidation model. What are the advantages? These are the most beneficial advantages of liquidation you are likely to see should this become the best option for your company: 1) Minimise debt repayments Among the biggest advantages of liquidation is the fact that your debts will be largely written off (except in certain circumstances).You'll still need to cover the cost of your company's 'Statement of Affairs' and creditors' meeting.However, all subsequent liquidation costs (including debt/outstanding creditor repayments) will be met through the sale of company assets. This generally makes liquidation a cost-effective option.Any redundancy or restructuring costs will be administered by your insolvency practitioner. They will take responsibility for staff redundancies and related payments, as well as cancelling any leases or other long-term liabilities.Unless you've given personal guarantees or have drawn director's loans, these debts needn't be settled by you or your shareholders. 2) Cancel your lease arrangements Not only will you minimise any debt repayments you have accrued to-date, you can prevent any further payments going forward.Typically, any lease or hire purchase agreements will be terminated when you liquidate your company. This means you are no longer liable for any subsequent payments that may have comprised part of your original arrangement.If you owe any arrears to leasing company creditors, they may be able to claim this amount back from your appointed insolvency partners. 3) End the legal action Entering liquidation enables you to bring an end to the prospect of legal action and focus your efforts elsewhere.Unless you have some form of personal liability for company debt, your creditors will not be able to initiate court proceedings against you.You can therefore show that your company was closed due to voluntary action, rather than forced to close due to disgruntled creditors petitioning you through the courts. 4) Enable staff to claim redundancy pay Lastly, your staff will be able to claim redundancy pay, uncollected wages and outstanding holiday pay.Your insolvency partners will take the lead in terms of making staff redundant. These staff members can then claim redundancy pay, which will be settled using proceeds from the sale of company assetsEven if this is not sufficient to cover all redundancy pay, employees can then claim from the National Insurance Fund.As a director you can claim redundancy as well through the government if, and it is a big if, you paid yourself via PAYE at a reasonable rate, you do not owe the company money, and there is some sort of employment contract.  It is quick and easy to apply for redundancy in this way and there is no need to employ an outside consultant.With all these critical aspects legally resolved, you can focus your attention on your next venture. In the end, the ability to make a fresh start is the most fundamental of all of the advantages of liquidation. What are the Disadvantages? Investigation into Directors Conduct As is common with any sort of terminal insolvency the liquidator is obliged to look into the conduct of the directors.  They will look to see evidence of wrongful trading, misfeasance, fraud etc.  Ultimately, they are tasked with reporting to creditors why the company has gone bust and to ensure that bad directors face sanctions.  Of course if you have not done anything that would be deemed as "dodgy" or extremely incompetent, then you have nothing to worry about. Personal Guarantees May Be Called In It is quite common for lenders and suppliers to ask for personal guarantees on loans or goods in the event of company failure.  When a company goes into liquidation any directors personal guarantees do not die with the company. Overdrawn Directors Loan Accounts Need To Be Repaid If you owe the company money in any way, via a loan, or you have withdrawn dividends when the company was not making a profit then you may be liable to pay the money back.  In liquidation any money owed to it will be seen as an asset and the liquidator will attempt to recover it.  Liquidators tend to take quite tough line on this as it is often the only asset the company has left in liquidation.  The creditors will want to see this chased as much as possible. Cannot Reuse Same or Similar Name Once a company is liquidated then you cannot set up a new company with the same or similar name.  This is covered by section 216 of the Insolvency Act 1986. The idea is that you must not create confusion for creditors of the old company.  You may be able to use the name if you buy it off the liquidator or get permission from the court.  This is a complex area of law and you should refer to our page on reusing a company name