Liquidations

Can I Be Held Personally Liable For My Company’s Debts?
As a general rule the directors of a limited company in liquidation will not become liable for the company’s debts unless they have given a specific personal guarantee. However, in certain circumstances, a director may become personally liable if he or she has committed certain offences such as wrongful trading, preferences or transactions at an undervalue. It is therefore vitally important that the directors of an insolvent company take professional advice as early as possible to ensure the do not unwittingly commit any offences. At Hart Shaw Business Recovery & Insolvency, we will advise you on your responsibilities and duties as a director to minimise this risk.

Will I Have To Attend A Meeting Of Creditors?
It is a requirement for the company’s director to attend and Chair the meeting of creditors when the company is placed into Creditors Voluntary Liquidation. In practice the liquidator will run the meeting and do most of the talking and the director will only have to answer any questions that are asked. It is often the case that creditors do not attend creditors meetings in person but submit proxy forms for the chairman to vote. If creditors do attend there are usually only one or two and therefore creditors meetings are nothing to worry about.

What Will Happen To My Employees?
Should it be necessary to declare some or all of your employees redundant, any claim that they may have for arrears of pay, holiday pay, notice pay or redundancy pay will, subject to certain limitations, be paid out of the Redundancy Fund. If the business can be sold and jobs are saved, the employees will be transferred to the new employer and their accumulated employee rights will be protected under the Transfer of Undertaking Protection of Employment regulations (TUPE).

Can I Buy Some Or All Of The Assets Back From The Liquidator?
Yes. The duty of a liquidator is to sell the assets for the best possible price. If the best offer received is from the director, there is no reason why the liquidator should not accept it. If a director purchases the assets this should be brought to the attention of the creditors either at the creditors meeting or in subsequent reports.

Can I start Again Using The Same or Similar Name?
Section 216 of the Insolvency Act 1986 restricts the re-use of a company name or trading style in order to protect the public interest. If this section is contravened the director faces potential personal liability and possible criminal prosecution. Names may be reused in certain circumstances but as this is a complex area you should seek professional advice at an early stage.

Can I Still Be A Director Of Another Company?
The fact that a company has been liquidated does not prevent its director from acting as a director of another company. The only bar on acting as a director will be if the Secretary of State obtains a disqualification order under the Company Director Disqualification Act 1986.

When Might A Director Be Disqualified?
The liquidator of a company will investigate the affairs of the company and the events leading to its liquidation. If the liquidator discovers evidence of unfitness, a report on the conduct of the director will be issued to the Secretary of State who will decide whether it is in the public interest to commence disqualification proceedings. Areas of unfitness might include:-

Trading the company whilst insolvent to the detriment of creditors (wrongful trading).
Committing a Preference, where certain creditors are paid in preference to others.
Committing a Transaction at an Undervalue where assets are sold at less than their true value.
Taking deposits knowing that orders will not be fulfilled.
Reusing a company name in breach of Section 216 of the Insolvency Act 1986.
Not keeping proper books and records or filing accounts.