Helping directors online for over 23 years.
KSA Group, who own this site, will help you to fix problems in your business. We won’t charge for any initial advice or face to face meetings. We speak in English. We will save you money and your precious time. However, we do advise that you have a look through our guides and options so you can have an idea about what is possible for you, given your current situation.
When you call our freephone number 0800 9700539 you will quickly speak to someone who wants to help you, not criticise you. We help people like you every day – imagine how you will feel when we start to lift the load off your shoulders?
What are the powers of HMRC Bailiffs and Enforcement Officers? Can They Enter My House?
A Bailiff, HMRC officer or an Enforcement Officer has the power to take control of your goods and possessions in order to satisfy a debt.Read
Is My Company Insolvent? Take This Insolvency Test
A company is deemed to be insolvent if it is unable to pay its debts as and when they are due, or the value of its liabilities is larger than the total value of its assets i.e. it has a negative balance sheet.Read
What is a CVA? | Company Voluntary Arrangements Explained
A CVA or Company Voluntary Arrangement is a legally binding agreement with your company's creditors which allows a proportion of its debts to be paid back over time. 75% of the creditors, by value, who voted need to support the proposal.Read
Directors Personal Guarantee – What Happens In Insolvency or Liquidation?
What Is A Personal Guarantee? As a company director, lenders, some suppliers, and landlords may request that you sign a Personal Guarantee (PG). This guarantee acts as security for a company's liabilities such as debt repayments or rent. By so doing, the creditor will make you personally liable for the debt owed to them in the event the company becomes insolvent. This means that the protection normally given to directors of limited liability companies is taken away, or in more legalease "pierces the corporate veil of protection"If you have been asked to sign a PG, you should always seek independent legal advice. Terms can vary, and it is not uncommon for the banks to request a legal charge over your home at the same time. It is also worth noting that most banks will keep a PG on file indefinitely, even once the borrowing has been repaid. Situations Where A Personal Guarantee May Be RequiredBank Overdrafts Commercial Rents Trade Credit ( Especially in Construction Industry) Unsecured Business Loans Invoice Finance Property Loans Leasing AgreementsCan Directors Get Out Of A Personal Guarantee If The Business Is Insolvent? In insolvency, we do get asked sometimes what happens with a personal guarantee. It is a stressful time when a business is in difficulty, and people hope for the best but fear the worse. However, the thorny problem of personal guarantees (PGs) does loom up. You simply cannot get out of a personal guarantee. The only way is to either renegotiate the contract so that your lender no longer insists on a PG. If it is called in, then;Pay it, come to an agreement to pay it, or in the worst case, go bankrupt.Are Personal Guarantees Enforceable? If the personal guarantee has been done properly and is legally sound then it is enforceable. However, it can sometimes be the case that documents have been lost or the guarantor didn't actually realise what they were signing. The latter situation is hard to prove as directors have to hold up to a higher standard than normal consumers signing contract. It is risky to think that personal guarantees are unenforceble as this is rarely the case. Besides do you have the resources to go to court? How will the creditor claim on the personal guarantee? If a PG is called upon, the next step can vary. This depends on the creditor, and the amount being called on. The usual routes are:The creditor will issue a Statutory Demand.which will give you 21 days to either settle the debt or reach an agreement to pay. If this is not possible, the creditor can start bankruptcy proceedings (providing of course that the debt is over £5000 which is usually the case with PGs). Previously it was £750. However, new rulings enforced from 1st October 2015 increased the threshold. The creditor can apply for a County Court/High Court Judgement. The usual results will be that they then wither get a Warrant of Execution and get the bailiffs in, or they go for a Charging Order to secure the debt against your home.If a PG is called upon, the first route is to get legal advice to ensure it is valid. If it has not been drawn up and/or executed correctly, it could well be invalid. The second route is to talk to the creditor (if you haven't already). Legal action can be a lengthy and costly affair, and most creditors would accept a negotiated settlement, as long as there is a strong commercial case for them to do so.The best way to protect yourself would be to seek professional help prior to the default event, which causes a PG to be called upon. The earlier the professionals get involved, the more tools they have at their disposal to help you. If you have a PG that is being called upon, do remember there is still help at hand, but the available options are somewhat reduced. Talk to us re the personal guarantee issue or Keith Steven re the company's problems on 0800 9700539. What about Personal Guarantee Insurance? Some insurers offer personal guarantee insurance, which may go a little way to covering costs should the worst happen. The cost of this insurance will depend on the level of cover or the risk involved. Insurers will also look at cash flow forecasts, any previous defaults in payment and the type of industry the company is in. Often the insurers will cap the liability at 80% of the amount that migh be claimed upon.As of December 2020 HMRC has moved ahead of floating charge holders in order of creditor priority, such as invoice finance, who incidentally often ask for personal guarantees, in getting paid in insolvency situations. This will mean more claims on PGs against directors by their lenders. Therefore if you think your company could be rescued don't delay.A word of warning. A personal guarantee is personal and has nothing to do with the company. A lender may be able to place a charge over your property so that they can recover the debt in the event that you cannot pay.Also, be aware, that paying creditors, who have a personal guarantee from you, before creditors that do not can be considered as paying a preference . This will mean that in a terminal insolvency event such as liquidation or administration the payments could could be reversed. Does having a personal guarantee affect your credit rating? The answer is simply, no. Why? because a personal guarantee is not registered on any public document. It is simply a private contract between the parties. Of course, if your personal guarantee is called in and you get into financial difficulty then it will affect your rating. There have been calls for a register of personal guarantees that exists in some jurisdictions in Continental Europe. So what can we do to help you if you are worried? Perhaps the most important thing we can do is try and ensure that the guarantee is not called in. I.e. can we find a way to save your business? If the company is not viable and has to go into liquidation, then we can help you talk to whoever has insisted on a guarantee, and try and come to some sort of settlement.Landlords do often ask for personal guarantees for rent arrears and the liabilities under the lease. It should be remembered that landlords can and do try and call these in. However, if you are building up arrears with the rent, then you must take advice. Lease obligations can be bound in a CVA, and the power of a CVA enables you to vacate premises if necessary. It may be possible to assign the lease to another operator to ensure that you are not on the hook for the remainder of the rent. Talk to us for more information. You can call and talk to a director anytime on 07833 240747.Read
What Does Going Into Administration Mean?
Going into administration is when a company becomes insolvent and is put under the control of Licensed Insolvency Practitioners. The directors and the secured lenders can appoint administrators through a court process in order to protect the company and their position as much as possible. Going Into Administration - A Simple Guide Administration is a very powerful process for gaining control when a company has serious cashflow problems, is insolvent and facing serious threats from creditors. The Court may appoint a licensed insolvency practitioner as administrator. This places a moratorium around the company and stops all legal actions.The administration must have a purpose and the Government encourages the use of company rescue mechanisms after administration. The 3 purposes (or objectives) of Administration Rescuing the company as a going concern. (Note: this purpose is to rescue the Company as opposed to rescuing the business undertaken by the Company.)Company rescue as a going concern – this is usually a company voluntary arrangement. The company enters protective administration and is then restructured before entering into a CVA. The CVA would set out proposals for repayment of debts to secured, preferential and unsecured creditors. When the company has its CVA approved by creditors, then the administration process comes to an end after 28 days. Achieving a better result for the company's creditors This is as a whole than would be likely if the company was to be wound up (liquidation) See the differences between Administration and Liquidation. This better result is usually obtained by selling the BUSINESS as a going concern to one or more buyers. The company and the debts are “left behind”. The better result may include securing transfer or employees under TUPE, as well as selling goodwill, intellectual property and assets. Controlling and then selling property/debtors. This is called realising assets. Then the administrator makes a distribution to one or more secured or preferential creditors, in order of creditors priority. Usually the business ceases trading and employees are made redundant.Only if the first two options are deemed unattainable, can the administrator use this third option.Under the administration option, it is possible for the company and its directors (or a creditor like the bank) to apply to the court to put the company into administration through a streamlined process.However, the law requires that any finance provider (like a bank or lender), with the appropriate security, is contacted and the aims of the administration be discussed and approved. The finance provider must have a fixed and floating charge (usually under a debenture) and the charge holder will need to give permission for the process to go ahead. Five days clear notice is required. Be aware, though, that a secured lender can appoint administrators over a company without notice if it thinks its money is at risk. So communication with the secured lender is essential. How long does going into administration last? It depends very much on the circumstances. The administrators take on the employment contracts of the company after 14 days so it is desirable that the business is sold out of administration before that date. The insolvency practitioners are not allowed to run the business at a loss and so making the creditors position worse off. If there are large amounts of money to collect in or substantial realiseable assets then they may trade for longer periods. During this time they will need to report to the creditors at regular intervals.Who gets paid first if a business goes into administration? What is a pre-pack administration or administration pre-pack sale? The pre packaged administration sale used to be a very popular method of rescuing a business. However, there has been much media coverage of creditors' dismay at seeing their "debt dumped" by a former customer. In response there is now much increased regulation. How does it work? The company prepares itself to enter administration and sell its assets to a new company ("newco") or to an existing 3rd party company. This is a very powerful, far reaching process that can protect the BUSINESS and be a form of business rescue, however usually the old company (oldco) is liquidated afterwards. See our guide on Pre Pack Administration for more information. Alternatively call Keith Steven on 07974 086779 to discuss how a pre-pack administration may or may not work for your company? Alternatives to Administration As the principal purpose of administration is to rescue the business, the main alternatives are: Refinancing The shareholders, wanting to protect their investment, might be persuaded to provide further loans, equity or investment to the company to avoid administration, or new lending/refinancing/debt products may be required. Of course, raising new capital in the current markets may be extremely difficult, especially if the business cannot, over time, be returned to profitability and without fundamental changes. A Company Voluntary Arrangement A company voluntary arrangement or CVA for short is a legally binding agreement with your company’s creditors which allows a proportion of its preferential (HMRC) and unsecured debts to be paid back over time.The CVA period can be 6 months to 5-6 years. Once prepared the CVA proposal is put to all creditors and 75% of the preferential and unsecured creditors, by value, must vote in favour to ensure a successful approval of this voluntary scheme. It is hugely powerful too, for restructuring costs, reducing employment numbers, reducing overhead costs and improving cashflow. Once the proposal has been approved then all HMRC and unsecured creditors are bound by the arrangement. The company can carry on trading as usual, and the directors remain in control. Shareholders are not diluted and do not lose ownership. CVA can be a powerful alternative to administration and the process leaves the directors in control. Got questions on administration versus CVA and how each may work for your business? Speak to us free of charge now 0800 9700539 What is administration followed by CVA? Basically the company enters administration to get protection from creditors. The administrator then works with the company's directors to produce his/her administration proposals. Once these are accepted the administrator hands control back to the company's board using a CVA. This is powerful tool despite the fact that it is expensive and directors are not in control during the administration period. If you want to read more about the process then please see this page hereGot questions? For answers to all these questions read our guides or call us now on 08009700539. Our trained, high quality advisors will help you.Read
What is Creditors Voluntary Liquidation (CVL)?
Creditors voluntary liquidation is when the directors decide that their company should stop trading and its assets are "liquidated" and turned into cash. This is usually due to the company being insolvent and the directors do not want to be wound up compulsorily by the court.Read
Can I claim Directors Redundancy in Liquidation?
When a company goes into administration or liquidation the directors of the business are in effect made redundant. Their powers and duties as directors cease. So, it isn't surprising to know that directors are in fact entitled to redundancy payments if they were employed by the company. Given the company is insolvent then it cannot afford to make the payments, so instead the bill is picked up by the Redundancy Payments Office (RPO). This fact can help alleviate some directors concerns about liquidation. In any liquidation the employees are able to claim for arrears of Wages, accrued Holiday Pay and Pay in Lieu of Notice, and if they have been working for the same employer for two consecutive years are also entitled to receive a statutory Redundancy Payment. The same applies to directors. There are a number of companies out there claiming they can get large payments for directors but there are a number of caveats. What are the eligibility criteria? You must have been employed by the company and received a wage commensurate with your work. This is not often the case as directors usually pay themselves with dividends and take a minimum wage for tax reasons. This was actually one of the reasons why many didn't benefit from furlough payments during the pandemic as they were not actually employees.You must have proof you were employed. Again just being paid via PAYE may not be enough. You will need to show that you had a contract and that terms were set (these can be implied and not necessarily detailed in an employment contract) example terms might be holidays taken, sick leave, paternity.maternity payments, car allowances, pension provision etc. ie all the usual things that an employee has.An employee may not work less than minimum wage. This is important as if you are putting in long hours and not being paid much then it actually means you are not an employee! As such any claim will not be accepted. Small monthly payments will just be seen as extracting money from the company as an office holder not an employee. How do I apply? Once the company has gone into liquidation or administration then there is an application form that the directors can fill in. It doesn't take long and there really isn't any need to employ a third party to do the claim for you. Some companies are making some misleading claims about average payouts etc. How much am I likely to get paid? You will receive redundancy and loss of pay if you are entitled to it. However, in most cases that we have dealt with the directors owe the company money and this negates any payout that is likely to be owed. In addition, the Redundancy Payments Office (RPO) is getting very strict about claims, so a director that has taken out substantial dividends is unlikely to be regarded as an employee.Read
We are Company Rescue and Not Clear Company Rescue
We are Company Rescue and Not Clear Company Rescue! Clear Company Rescue are offering a solution to your issues by offering to buy your insolvent company.Does this sound too good to be true?The actual process is legal as there is nothing stopping anyone from buying an insolvent company in the hopes of turning it around. However, if the correct course of action is that it should be liquidated, as the debts could never be paid back from current trading, then you have to think why would they do it?!Why take on the debt and the hassle? They will of course most likely allow the company to be wound up eventually by a creditor. Check whether you will be charged for this somehow. Bear in mind that just resigning as a director of a company does not mean that any responsibility for what happened in the past is just wiped away. You could still be disqualified or made personally liable for any of the debts if you have not acted properly. In addition, under the Insolvency Act 1986, when a company is insolvent the directors have a duty to act in the best interest of the creditors. If you pay someone to take it off your hands are you actually acting in the best interest of the creditors or yourself? It is questionable to be sure, and there may be action against you down the road when the company is eventually wound up by the court. Insolvency Practitioners are licensed and under the regulations they have to act in the best interest of creditors.Be very wary if you somehow manage to keep the assets of the company without paying for them. This can be what is deemed as a "transaction at an undervalue" and can be reversed up to 2 years later by a liquidator.Also what about a preference? If you pay back some monies to a family friend instead of HMRC or BBL then again that can be reversed or voided at a later date.It goes without saying that selling the company will not absolve you of any personal guarantees that you gave on behalf of the company.What if you owe the company money? The new directors will pursue you for the debt. Directors responsibility under law, if the company is insolvent, is to act in the best interest of creditors. So they may pursue you personally for the debt. Many directors are not aware that they owe the company money. If you have paid yourself drawings and not via PAYE and now the company is insolvent it is highly likely that you owe tax that the company has to pay. More on overdrawn directors loan accounts here.Ultimately these sort of schemes and legal gymnastics carry risk. Insolvency is highly regulated and there are no shortcuts.Do you want to take the risk and give your money to a firm that is unregulated by any professional body?Remember that company directors are not protected by the law in the same way that general members of the public are. They are deemed to be "street wise" and knowledgeable. So there are no cooling off periods, consumer rights, ombudsmen, distant selling rights etc.Read
Creditors Voluntary Liquidation CVL – Frequently Asked Questions
A Creditors Voluntary Liquidation or CVL is an insolvency process started by the directors to close down their limited company and liquidate its assets to pay off its debts.Read
Overdrawn Director’s Loan Accounts in Insolvency
An overdrawn director's loan account is created when the director takes money out of the company, by the form of a loan, resulting in the director owing the company money. When the amount extracted is more than what can be put back in, the account is overdrawn.Read