As a director of a limited company that you know or should know is insolvent, you have responsibilities to the creditors of the company to protect their interests.
The most important step a director can take is to protect themselves as well as the company and its creditors.
Directors can do this by taking professional advice from a licensed insolvency practitioner as soon as possible.
Avoid ‘salesmen’ and those who offer what look like ‘quick and easy’ solutions.
All of the partners at Harrisons Business Rescue are licensed insolvency practitioners.
Harrisons Business Rescue can advise on the issues in the company causing the problem, we can identify the solution to the problem and help implement the solution.
This may mean that the business can be saved.
This is our first aim.
It may be that the company is insolvent and unable to continue in its current state.
If the company can’t be saved, we can advise on whether trading should cease immediately or whether, for example, work in progress should be completed to increase the assets of the company that are available to pay a return to creditors.
As a director you need to protect all creditors including banks and finance companies, suppliers, HMRC etc, as well as employees who may be at risk of not getting paid.
Directors should not do anything that will worsen the position for creditors such as taking on new credit that you can’t repay.
Directors also need to take steps to safeguard the assets of the company.
Once trading has ceased, we can assist the directors and shareholders in placing the company into liquidation.
The process of liquidation will involve the assets of the company being realised for the benefit of creditors.
Employees are also able to submit claims to, and be paid by, subject to certain limits, the Redundancy Payments Office, which will help limit their loss.
There are three key area for directors in all liquidations regardless of what any ‘salesman’ may tell you
1. There will be an investigation into the failure of the company and a report will be submitted on their conduct to the Insolvency Service,
2. Creditors will pursue the directors for any personal guarantees given by them,
3. The liquidator will pursue the directors for any loan accounts they owe to the company.
At Harrisons Business Rescue, we can advise directors on what will be considered in a conduct report as well as advice on dealing with any personal guarantees.
We will also be open about the recovery of any loan accounts, before we are formally engaged by the directors and the company.