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Worried Director What Will Happen To Me After Liquidation?

12th October, 2023

Written ByEric Walls MIPA FABRP

Director of Insolvency and Turnaround


Eric is a licensed insolvency practitioner regulated and licensed by the Insolvency Practitioners Association. His ethos is always "give the right advice, choose the right options, rescue first if possible." He has many years’ experience in accounting and insolvency having worked at Touche Ross (Deloitte) and has been involved in turnaround and insolvency since the late 80's.
Keith and Eric first met in a pub in Darlington in 2000(!) and have worked closely ever since, with Eric as a partner in Marlor Walls and now a director of KSA Group.
Eric has acted as nominee and supervisor of over 350 CVAs in that time and knows the pressures and difficulties of that approach on all parties involved in making the effort for a successful rescue of the business.
From smaller “family owned” companies, to businesses with a turnover exceeding £20 million, a CVA can prove an invaluable rescue package, securing not only a better return for creditors than might otherwise be generated, but also allowing the business to survive and to continue to work with its trusted suppliers.

Eric Walls MIPA FABRP
  • So how will liquidation affect me?
  • What is Creditors Voluntary Liquidation?
  • What if I have signed personal guarantees?
  • I have heard about directors being able to claim redundancy in liquidation
  • Can I be a Director of a company after liquidation?
  • Can a director of a liquidated company get a mortgage?

“A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?”

Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, can stop decisions being made, this failure to make a decision is really what could land you in trouble.

So how will liquidation affect me?

Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.

Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don’t act to put the company into liquidation.

If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.

This is known as the “lifting of the veil of incorporation” that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.

Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.

Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved.

What is Creditors Voluntary Liquidation

In short, liquidation usually means, the company’s trading stops and it’s assets are turned into cash or “liquidated”.

All other possible liabilities, like employment liabilities, landlord’s rent or payments to lease companies are stopped. It really is the end of the company, but the “business” may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life.

What if I have signed personal guarantees?

If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company’s debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.

All banks will agree a deal to repay the PG over time – provided you work with the bank to reduce their exposure.

One great piece of FREE advice – always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other “compliance” issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.

 

I have heard about directors being able to claim redundancy in liquidation

If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ 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”.  It isn’t worth the risk.  If it sounds too good to be true then it probably is!

Can I be a Director of a company after liquidation?

Yes you can.  There is nothing to stop you being a director of another company, or setting up a new one, as long as you have not been disqualified or made bankrupt.  Be aware that there are strict rules about a new company’s name not being the same or similar to the old liquidated one.  For more information on this read our page about starting a new company after liquidation

Can a director of a liquidated company get a mortgage?

Any mortgage lender is interested in your ability to make the payments over an extended period of time.  Obviously if you can no longer draw a salary from the liquidated company then they will take that into account.  However, if you have a new job or a new company then a previous liquidation should have no real bearing on their lending decisions.  Bear in mind if there is a history of liquidations then they may be more cautious on lending you money based on your current company directorship. Again it is better that your company is brought to an end using a creditors voluntary liquidation (CVL) as opposed to a compulsory liquidation that does indicate that you left any decision too late.

What you should do

You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:

Just one CALL will help relieve the stress and get you out of the mess.

Why not call 08009700539 or 020 7887 2667 now?

We could help you start the liquidation process today.

(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)

Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.

Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back Loans

We are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at help@ksagroup.co.uk

 

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