What happens to me if the company goes into administration?
Answering simply, nothing. However, as a director of the insolvent company, if you have not acted properly, as you go through the insolvency process, you may face personal issues in the future.
When administrators are appointed then the directors’ powers cease. They are still responsible for their previous actions though. Usually the administrators will either sell the business quickly or if they trade the company in administration they will make the directors redundant as employees. So you will be sent home.
Can I be a director of a company in the future if this company goes into administration?
Yes, you can be a director of as many companies as you would like. You may be part of a new company that is going to buy the business from the administrators. In which case you must get personal legal advice on conflicts of interest.
Make sure that the company name is acquired before re-using it. And it is obvious, what you shouldn't do is to act irresponsibly when acting as a director of the old company and then set up another company and do the same silly things again.
- The law requires directors to keep up-to-date financial information and to understand the financial position of the company. If you fail to do this, legal action may be faced by a future administrator or liquidator.
- Taking cash out of the company as drawings (not dividends) means that you owe the company money. This becomes an asset, a debtor and the administrators or future liquidators must collect that money or do a deal.
If I have provided personal guarantees will these be called in if the company goes into administration?
The answer is yes. It is very likely that if the company enters into administration, if you have provided security for company debts in the form of a personal guarantee , then this may be called in. If you're in any doubt about this please call us . We can help directors with any related problems or queries.
Will I be disqualified as a director is our company goes into administration?
NO – as long as you have acted suitably, rapidly and responsibly . If you haven't, and you knew the company was in serious financial difficulty then YES you may be disqualified…Take back control and protect yourself by asking for expert free help today! - call 0800 9700539
By failing to act and making creditors debts worse or running the company’s cash down to £0 to pay yourself, when other creditors are not being paid; likewise if you are taking some of the firms assets which do not belong to you, legal action by the future liquidator may be faced. But to do that, you would have to be extremely silly!
If you are thinking that the business will soon run out of cash then you must take advice now. Take back control and call us on (0800) 970 0539
Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide was mostly written pre Covid-19 and there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.