Ceasing trading

20 September 2017

I hope we were able to provide some straight forward advice today.

I would recommend that the directors cease trading forthwith. Yes, try and collect the doubtful debtor of £7k, but don’t spend any money on debt chasing. Write to the lessor for the vehicle and request that they repossess the vehicle as the company has ceased trading and will pay no further rentals. See attached a suggested letter to write to ALL creditors.

Speak to the company’s bank manager and tell him the bad debt means the company is no longer viable and has ceased trading. The company’s overdraft will then be formally called in. This can then be either added to your sole tradership debt and a longer term loan taken out to pay ALL bank debt back. Or you can say the bank will be paid from the sale of the home in future and your equity will pay the bank and credit card companies back a %age of the liability.

Of course if the bad debt is partly recovered, this would offset some of the bank debt. Technically speaking, this may breach the Insolvency Act (s239 Preference) as your personal position would be modestly improved, but the low level of trade debts means that no creditor would worry you about preference.
The sole tradership can and should continue to trade and I would hope the bank allows a formal reorganisation of the overdraft and loan, for that business, with the PG debt being called in. Or the bank may wish to keep matters separate. 

Do not use an IVA unless absolutely necessary, ie if creditors issue a bankruptcy petition before the recovery strategy can work through. 

Separate out each issue and write out a simple strategy plan for each. Then stick to it.
If you have any questions please call or email me.

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