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What Directors of Companies with Debts Need to Know in 2022

Written by Keith Steven Managing Director 10 January 2022

stressed looking director

Here is what we, in the insolvency world, know now after the last 12 months of dealing with thousands of distressed directors.

  • Business growth is impacting working capital. Do you need to sort out cashflow problems? Will the business need new funding soon? Has your bank said no? If so contact us on 0800 9700539
  • Staff shortages due to isolation, until we see relaxation perhaps in late January, anyone close contact with someone at work with covid could result in employees being off for 7 days. This harms productivity. What is your plan to cope?
  • Inflation and rising taxes are likely to dampen consumer confidence on some kinds of spending.  How do you plan for these changes?

Annual accounts, corporation tax returns, confirmation statements must be filed even if your company was seriously impacted by Covid and your own Self Assessment returns need to be filed by 31st January 2022. These take time and cost money with accountants. Failure to file can lead to fines.

Many directors are considering voluntary dissolution for their companies or clients companies if they have unmanageable debts. This is a waste of time and possibly advisory fees.

If your company has a bounce back loan, the lender will REJECT the strike off and will actively tell Companies House it rejects the dissolution. Otherwise the BBLs cannot be refunded, (by the British Business Bank) to the lender.

If the company owes any tax such as VAT, PAYE, NIC or corporation tax, then HMRC will REJECT any strike off and actively tell Companies House it rejects the dissolution.

HMRC is a secondary preferential creditor for VAT, PAYE, NIC, and it will require voluntary liquidation or may even begin to issue winding up petitions to seek any recovery through compulsory liquidation. Any taxes owed, by the company, may be lost if the company is dissolved.

We are also seeing many enquiries and clients receive letters from private debt collectors, who're acting on HMRC's behalf. These are usually for under £10,000 of tax owed. Has HMRC outsourced the small stuff, to focus on larger debtors?

The message is loud and clear - do not waste time, or incur advisory fees, by trying to avoid insolvent liquidation, get advice quickly and ACT quickly. The correct solution is creditors voluntary liquidation. If the company is viable, then consider the rescue options too.

If you are a company director or advisor, please read our experts guide to help learn more about this process. It is FREE and anonymous to download.

If you want another and compelling reason to avoid proposing voluntary dissolution....when the company has creditors and BBLs
The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act has just been passed into law and it, may be used to pursue existing and former directors for debts, with the possibility of prosecution.

The bill is designed to prevent:

  • False dissolution of companies to avoid investigation into the directors
  • Using the dissolution of companies to shed liabilities and transfer assets to a new company.
  • The use of the company dissolution process as an alternative to formal insolvency proceedings, such as voluntary liquidation

2021 saw a 205% increase in the number of directors being prosecuted for fraud, showing that the Insolvency Service is serious about cracking down on directors, especially in relation to the CBIL and BBL schemes.

These new pieces of legislation mean that it is much easier to investigate dissolutions and will open up company directors to a much higher level of scrutiny.

So the message is this: do not try to dissolve an insolvent company that has BBLs debts, HMRC and or other creditors.

Categories: Personal Guarantee What Happens In Insolvency?, Implications for Directors, Bounce Back Loans FAQ

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