When a company becomes insolvent, which is defined as being "unable to pay its debts as and when they fall due" or where "its assets are worth less than its liabilities", its directors have a duty to act in the interests of creditors.
As a general rule the debts of the company remain with the company and its directors are not personally liable. However, if a director fails in his duty to act in the interest of creditors, or acts in breach of legislation, there is a risk that he may become personally liable for some of the company’s debts. It is therefore important that a director of a company in financial difficulty takes professional advice so as to limit this risk.
At Hart Shaw Business Recovery and Insolvency we understand the pressures that directors are under especially when deciding whether or not to continue trading. We have extensive experience in advising directors and are able to provide clear, practical and unambiguous advice to assist them in their decision making.
The earlier a director takes advice, the greater are the prospects that the company can be saved. It may be possible for the company to be turned round following cost cutting measures and refinancing. Alternatively a formal insolvency procedure may be required to allow the company to continue trading and be saved. Such procedures are a Company Voluntary Arrangement, which is a deal between the company and its creditors that allows the company to continue trading or Administration where an Insolvency Practitioner is appointed to run the company with the aim of rescuing it.
However, there will be times when the company can not be saved and the right thing to do is to place it into Liquidation. Even then it may be possible for the business to be saved by transferring it to a new company under the control of the directors’ thus preserving value and saving jobs.
Please remember that doing nothing is never a good option as the company's problems will only get worse and the business will be put at greater risk. The sooner you take advice the sooner your problems will be resolved.
For No Cost, No Obligation Advice call our Confidential Helpline on 0800 068 68 57