Can I be a Director of a Company After Liquidation?
Contrary to the popular belief you can be a director of another company if your business is liquidated. However, a failure to act responsibly and quickly is what can lead to trouble. Liquidation does not automatically prevent you from being a director. You can absolutely start or join another company as a director, with two key caveats:
- You must not have been disqualified as a director
- You must not be bankrupt.
While directors can generally continue to manage new companies following a voluntary liquidation, certain circumstances might trigger a disqualification, and failing to act appropriately could lead to devastating personal consequences. This could arise from:
- Continuing to trade while the company can’t pay its debts
- Taking credit knowing repayment is impossible
- Neglecting proper financial record-keeping
What Happens to a Director in Liquidation?
To minimize negative fallout, the key is to approach liquidation responsibly, work closely with a licensed insolvency practitioner, and act quickly. Your personal risk as a director rises the longer you delay taking action. Without a creditors voluntary liquidation, creditors could force a compulsory liquidation, where the Official Receiver will investigate the activity of directors. If they can prove there was wrongful trading, you could be made personally liable for company debts, a process known as the “lifting of the veil of incorporation.”
Additionally, you may face disqualification under the Company Directors Disqualification Act 1986 for up to 15 years. The most severe consequences extend to the loss of personal assets like your home. All this means is that it is vital to protect yourself by acting quickly to cease trading and put the company into a creditors voluntary liquidation, or consider a company voluntary arrangement if the company is viable.
What About Common Concerns?
Personal Guarantees and Your Home
If you’ve signed personal guarantees or indemnities to lenders, these could be called in if the bank cannot recover its money from the company. It’s crucial to understand that delaying liquidation won’t prevent these guarantees from being activated. A delay could actually expose you to far greater financial risk. The good news is that most banks are willing to negotiate repayment plans, and making sure that all tax returns and annual returns have been completed and sent in demonstrates that you have been acting properly. Since December 2020, HMRC now ranks ahead of floating charge holders, which can impact how lenders with personal guarantees recover their funds. This change makes prompt action even more important.
Claiming Redundancy
If you’ve been employed by the company and received payments through PAYE, you may be eligible to claim redundancy directly from the government. The process is surprisingly straightforward, typically taking around 20 minutes to complete a form. Our advice is simple: the most secure route is to handle the claim yourself or seek guidance from a reputable insolvency expert to ensure all your paperwork is in order.
Getting a Mortgage
Mortgage lenders are primarily interested in your ability to make consistent payments over time. A previous company liquidation shouldn’t significantly impact lending decisions, especially if you’ve secured a new job or established another business. A voluntary liquidation is viewed far more favourably than a compulsory liquidation, as it demonstrates proactive financial decision-making.
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. Call one of our advisors or our IPs now. Remember: NO BUSINESS is worth losing your health, relationships, or your family 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.
If you think that your company should be liquidated, it is crucial to contact us immediately. We will advise on the most appropriate action.
- Speak with our initial advisers: Make contact with our team, via phone, form, or online chat. We will arrange a free consultation with one of our consultants to discuss your situation in depth.
- Initial assessment: We will advise if an insolvency procedure is the most appropriate route forward or if alternative solutions better suit your company’s problems and we issue a 30 page report (free of charge).
- Formally engage with our team: If we can help we will set out our proposals and provide a cost for the work.
