I have limited company debt - what can bailiffs do?

It’s a worrying time when your company is struggling with debt problems. You might be finding it difficult to identify which options are suitable for you. This blog is: I have limited company debt – what can bailiffs do?

Company debts can come in many forms from many different companies. The companies that your business owes money to are known as ‘creditors’. It’s normal for a business to have creditors, but they can become a problem if you cannot afford to pay them.

A business that can no longer pay its debts when they fall due is labelled as ‘insolvent’. If a company becomes insolvent, it’s crucial that you seek advice as soon as possible. Leaving your company’s situation without advice can make it much worse and can even lead to you being in trouble as the director. A company is also insolvent if its liabilities are worth more than its assets.

What is a limited company?

Many companies in the UK have limited liability. This means that the company is a separate legal entity from its directors. Because of this, the company’s debt is its own responsibility, not that of the directors.

Having limited liability status also offers other benefits. It’s important to consider your options to ensure that you choose the most suitable option for your circumstances.

Can a director ever be liable for company debts?

Despite limited companies being a separate legal entity to the directors, there are some instances where a director can be liable for company debts. Here are some of the circumstances.

Personal guarantee

This is when a director signs a guarantee that they will pay off the company’s debts if the company cannot. These are best avoided as there is little chance of being able to get out of it in the future. They will be recognised as personal debts. Failing to pay them may lead to court fines and even prison.

You may also find that an enforcement officer visits your home to remove personal assets if you cannot pay back a personally guaranteed debt.

Wrongdoing is found

When a director places the company into liquidation, they will need to appoint an insolvency practitioner. One of the jobs that a licensed insolvency practitioner must complete is to look into your company accounts and see if they can find actions that caused the insolvency of the company. This may include looking for elements of wrongdoing, such as fraudulent trading or wrongful trading.

Bounce-back loan fraud

Many businesses took out bounce-back loans during the pandemic. During the application process, businesses were informed that the money must only be used for the economic benefit of the company and not for personal benefit. Despite this, many directors did use the money for personal items. These directors will be found out and will need to face the consequences. They may find themselves being made personally liable for the bounce-back loan.

What is a bailiff?

A bailiff can also be known as an enforcement agent. These agents can turn up to your property or business premises and take action, such as removing items. Bailiffs must only collect debts for creditors who are owed money and they must be authorised to do so.

There are different types of bailiffs depending on the money owed or the reason for visiting. Certain criteria must be met when a bailiff visits the property; for example, they must not force entry and can only enter through the property’s door.

You need to act quickly if bailiff action is taken against you, as you could end up owing even more money and even becoming bankrupt.

Who might send bailiffs?

Any creditor that is owed money from you or your company can send bailiffs or debt collectors. In the UK, HMRC is one of the biggest creditors, which means communicating with them is even more important if you cannot pay the money when it is due. Bigger creditors are more likely to enforce bailiff action on you and your company.

HMRC will be more understanding if you admit that you cannot pay debts. They may be able to offer you a time-to-pay arrangement to help you cover the debt owed. HMRC collects income tax and PAYE. Find out more about our support for HMRC Arrears.

limited company debt bailiffs

I have limited company debt – what can bailiffs do?

If you have limited company debts that you cannot pay, you need to seek professional financial advice. If you fail to take the necessary steps, you could end up being visited by a bailiff at your home or business premises.

A bailiff or enforcement officer may visit your property multiple times and they are legally allowed to do so if they are collecting money on behalf of a company creditor.

During the first visit, a bailiff may spend some time looking around the property. They will also make a list of assets that are available. Of course, if you can actually afford to pay the debts, then you should do so now. This will put an end to the bailiff action, and the creditor will stop trying to collect outstanding debts.

The value of the items on the list should cover the costs of the debt. These items will then become part of the ‘controlled goods agreement’, which means you cannot remove them from the business premises, sell them or give them away. This means that these business assets could be sold by the creditors to recover money to make up the outstanding debt.

It is worth noting that enforcement officers can only take or list items that belong to the company, so they cannot list your personal assets.

What’s the best way of dealing with bailiffs?

In an ideal world, there would be no bailiff action on your business. You should deal with business debts before it gets to this stage. However, we understand that it’s not always possible.

The best way to deal with enforcement agents is to grant them peaceful access to the property. At this point, you should work hard to agree on a repayment plan with them. If you can organise a repayment plan, you must ensure that you stick to it. If you fail to stick to it, the enforcement action will be ramped up.

In these scenarios, it is always best to be honest with the bailiff and the company’s creditors. This will put you in a better position than lying or burying your head in the sand. Seek professional advice as soon as you can.

What are the consequences of bailiff action?

Having a bailiff arrive at your business premises is not a nice experience. You and your staff may find it quite stressful. With this in mind, it’s better to deal with the situation before it comes to bailiff action.

Additionally, you will end up being liable for the costs of the bailiff. This will include their appointment, letters, their visits and any storage space that’s required for business assets. This can end up being stressful for directors, as they are already dealing with financial difficulties.

Can a bailiff force entry into my property?

In most cases, a bailiff cannot force entry into your home. However, bailiffs that are collecting for some companies, such as HMRC do have the ability to enter the premises without your permission. Additionally, enforcement officers can force entry if they are collecting unpaid criminal fines.

Debt collectors may include limited company assets such as office equipment, company cars and more on their list.

Can I tell a bailiff to leave?

If a bailiff has entered your property and you ask them to leave, they do have to leave. Bailiffs must also provide proof of them being sent. You should not allow them to enter your premises if they cannot provide this proof.

If you receive an enforcement notice and cannot agree on a repayment plan with the enforcement officers, then you may need to enter a creditors’ voluntary liquidation.

Dealing with creditor pressure and bailiffs can be extremely stressful. It is much better to avoid this situation. If your company is struggling financially, you must seek professional advice. This will leave you in a much better position than you would be if you continued to leave the situation to get worse.

We hope this blog has been helpful regarding bailiff action. Are you in need of financial advice for your business? Please don’t hesitate to contact us for honest, confidential advice. We are more than happy to help.

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