We come across a lot of directors worrying about liquidating their companies for fear of personal and professional repercussions. Normally this is because they have received bad, second-hand advice or haven’t discussed the matter with a chartered accountant.
So long as you have acted legally and in time there is minimal personal risk to liquidating your company.
However, it is crucial you act swiftly and make the decision to take action without continuing to take credit while knowing that your firm will be unable to repay it. Fail to do this, or fail to accurately maintain books and records, and you could be looking at personal financial lose or even worse.
It’s essential to act sooner rather than later in order to minimise your own risks.
The most efficient way to deal with a company that is spiralling towards insolvency is to undergo voluntary liquidation. If you decide not to act, it is you as the director who faces all the risk… and the longer you put it off the greater the risk.
Failure to act can result in a compulsory liquidation and the Official Receiver will liquidate the business and investigate all the activity of the directors and the business over the last few years. This is referred to as a conduct report and would be compiled for all directors.
Should the Official Receiver discover that you or other directors have continued trading whilst insolvent, continued to take credit with little likelihood of repaying the debts, or failed to keep on top of accounts without taking action then you or they could be personally liable.
In fact, directors can be made personally and entirely liable for the company’s debts from the beginning of the insolvency.
Furthermore, any director can be disqualified for up to 15 years, via the Company Directors Disqualification Act 1986. Directors may be fined and could lose personal assets such as their homes, and face bankruptcy.
You and your fellow directors may have acted without this knowledge, but it is essential to move quickly and put your business into voluntary liquidation to protect yourself from personal risk.
What is a voluntary liquidation?
Simply put, liquidation means that the company ceases all activity while its assets are turned into cash or “liquidated”.
The business is entirely stopped – all liabilities eg rent and employment liabilities are ended. The company is finished but the pressure of the situation is alleviated and your life can continue as normal.
But I have signed personal guarantees…
You may have signed personal guarantees to lenders, and if the bank is unable to get its money back from the company then they may be called in. In this situation, there is little to be done. Our recommendation is to act as quickly as possible as the sooner you begin the liquidation process the less chance you have of facing up to these personal guarantees.
We can never stress how important it is to keep on top of all aspects of your book keeping. This will help limit the risk you face when heading towards insolvency and importantly reduce the chances of ever getting to a potential insolvency situation.
Get in touch for a more detailed explanation of the steps you need to take. Something as important as a liquidation should not be taken lightly so talk to the experts.
Call us today on 02070996772.