Help for Directors
The company may owe the money — but most directors want to know what insolvency means for them personally.
Will I have to pay the debts? What happens to my personal guarantees? What if I owe money on my Director’s Loan Account? Will I be investigated? Can I start another company afterwards?
Those are sensible questions to ask before putting a company into liquidation.
Insolvency does not automatically make a director personally responsible for everything the company owes. But your own position can be affected by decisions and arrangements that are separate from the company’s ordinary debts.
The earlier those issues are identified, the fewer surprises there should be after liquidation.
What are you most worried about?
Will I have to pay the company debts?
A limited company is separate from its directors. Insolvency does not automatically transfer HMRC, supplier or landlord debts to you personally.
There are, however, circumstances where personal exposure can arise.
I’ve given personal guarantees
Liquidating the company does not normally cancel a guarantee you gave personally.
Find out which debts are guaranteed, how much is potentially exposed and what the lender may do next.
I owe money to the company
If your Director’s Loan Account is overdrawn, the balance may become an asset that the liquidator is required to recover.
Understand the balance and your options before assuming it will simply disappear in liquidation.
I’m worried about the Bounce Back Loan
A Bounce Back Loan is normally a company liability, not automatically a director’s personal debt.
The important questions are how the borrowing was used and whether anything creates separate personal exposure.
Will the liquidator investigate me?
Every insolvent liquidation involves a review of the company’s affairs and director conduct.
That is part of the normal insolvency process. It does not mean the liquidator starts from the position that the directors must have done something wrong.
The liquidator may look at matters including:
- Why the company failed
- How company money and assets were used
- Director’s loan accounts
- Dividends and director payments
- Bounce Back Loans and other borrowing
- Payments to connected parties
- Asset transfers before liquidation
- Whether appropriate records were maintained
Most directors are much better served by preserving the records and explaining what happened than by becoming defensive about a process that takes place in every insolvent liquidation.
Could I be disqualified?
A company going into liquidation does not automatically result in its directors being disqualified.
Company failures happen for many reasons.
Disqualification becomes an issue where a director’s conduct is considered unfit and the matter is taken further through the director-disqualification regime.
If there is something in the company’s history that particularly concerns you, tell us before the liquidation rather than waiting to see whether the liquidator asks about it later.
Can I claim redundancy as a director?
Potentially.
Being a director or shareholder does not automatically prevent you from receiving statutory redundancy-related payments.
The key question is whether you were genuinely also an employee of the company.
If you qualify, the claim may include statutory redundancy pay and potentially other qualifying employment payments.
Can I start again after liquidation?
Usually, yes.
Being a director of an insolvent company does not automatically prevent you from forming or running another company.
There are, however, important rules to get right — particularly if you want the new company to carry on the same type of business.
Issues can include:
- Using the same or a similar company or trading name
- Buying assets from the old company
- Taking over stock, equipment or vehicles
- Goodwill, websites and customer information
- Employees
- Personal guarantees from the old company
Starting again is not the problem. Moving value out of the insolvent company improperly is.
What happens to the employees?
If the business closes, employees will normally be made redundant.
Eligible employees can make claims through the statutory insolvency payment system for qualifying amounts such as redundancy pay, unpaid wages, holiday pay and notice pay.
If you have employees, we can also help you understand what information they will need and when they should be told what is happening.
Before you put the company into liquidation
It is worth spending a little time looking at your personal position as well as the company’s balance sheet.
Ask yourself:
- Have I given any personal guarantees?
- Do I owe money to the company?
- Has the company paid me significant dividends or other sums recently?
- Have company assets been transferred or sold?
- Have I personally paid company expenses?
- Is there anything about a Bounce Back Loan that concerns me?
- Do I intend to start another business afterwards?
You do not need to solve each of those issues yourself.
But knowing they exist before liquidation gives us the opportunity to explain what they mean and what is likely to happen next.
Worried about what liquidation means for you personally?
Tell us what concerns you.
You do not need to wait until after the liquidator is appointed to find out whether a guarantee, Director’s Loan Account or other issue may affect you.
We can look at the company position and the main director issues together, so that you understand what is likely to happen before deciding how to proceed.