As soon as your company becomes insolvent or maybe in the future you must be aware that your responsibilities change as a director.
You’re no longer working on behalf of your shareholder and your duties now lie with the creditors of your company.
It’s critical that you don’t make the creditor’s positions any worse as this could cause you problems personally down the line.
When a company goes into liquidation an insolvency practitioner is duty-bound to review the conduct of the director and they will scrutinize very carefully how the company was run, particularly the final point before their advice was sought.
Here are some tips to help you reduce the chances of having problems personally if you have to liquidate:
- Most people don’t realize that if you are found to have breached your duties as a director you could be landed with personal liability for some or all of the company’s debts.
- The way people have spent Bounce Back Loans is going to be VERY CLOSELY watched.
- Maintain accurate books and records
- Keep all emails and notes of conversations
- Document your decision-making process and the reasons why you are continuing to trade
- Have up to date management accounts so you can understand the companies financial position in real-time
- Keep your creditors informed of your position, if you don’t they’re going to increase the level of enforcement such as bailiffs and CCJ’s and soon winding-up petitions , this will add more pressure to you and can be avoided as long as you keep people in the loop
- Do not pay anyone preferentially
- Take advice as soon as you can, the earlier you do this the more chance of a favourable outcome or rescue package for your business
- If you are advised that liquidation is the best option for you and the company don’t take months to do it
We hope you don’t end up in an insolvency procedure but if it may be a possibility then follow these tips to limit the risk of you being disqualified or being held responsible for any company debts.
Our aim is to help you understand your position and options as early as possible.
Justin Barker
I’m Justin Barker, the Managing Director at 1st Business Rescue. I have over 25 years of experience providing insolvency advice to business owners.
I understand how challenging it can be when dealing with financial difficulties within your business. It’s easy to ignore the problem and hope that it disappears, but this is often the worst thing you can do. Our dedicated team is here to provide honest, valuable advice to help UK directors deal with their personal situations in the most appropriate way.
No case or circumstance is the same, but I can guarantee that I am there to give you the best advice.
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