“What happens to the assets?”
The assets are in the main the property of the Company. The Liquidator will seek to obtain control of these and achieve a sale, wherever possible, to maximise funds available for the Company’s creditors. You, as Director, have a responsibility to ensure that the Company’s assets are not needlessly dissipated in the period between instructing an Insolvency Practitioner to assist and the Company being formally placed into liquidation.
“What happens to the investments I made into the business?”
The exact treatment of your investment will depend on how your funds were provided and what security you retain. Most investments made by directors in SMEs tend to be in the form of Director’s loans, which would normally rank your claim as an unsecured creditor. In this case, you would rank alongside all of the Company’s trade creditors. You may get no, or next to no, return on your investment and you should be prepared for this eventuality.
“Am I allowed to trade again?”
Yes. You are not prevented from trading or owning a business immediately, even if your current Company is about to be placed into liquidation.
The only restriction placed upon you will be the use of a similar trading name or style. This is forbidden under section 216 of the insolvency Act 1986 (link here), although there are exceptions to this restriction and you should discuss with the Insolvency Practitioner if you wish to continue trading using a similar style or branding.
“Does placing a Company into Liquidation mean I can no longer be a Director?”
Not at all. You are free to incorporate and business and trade as you so wish. You should be aware however that repeated business failures could be looked upon negatively by the Insolvency Service when they consider your conduct and suitability to act as a Director.
“I have personally guaranteed the balance due to [a creditor / the bank]. What will happen to me?”
Ordinarily most creditors will be made aware of the impending insolvency via the initial notice sent by the Insolvency Practitioner or an advert placed in the London Gazette. In most circumstances, if you have provided a personal guarantee to a creditor, it will be at this point that they will seek to call in the guarantee against the monies they are owed.
Depending on the level of debt concerned, you may wish to negotiate with the creditor informally or seek independent advice on your own personal situation. Please contact this office if you are concerned about any potential liability that may arise as a result of a guarantee you may have provided.
“Will the creditors look to me for their shortfall?”
Generally speaking, a creditor will only be able to pursue you personally if the debt is a personal one or you have provided a personal guarantee. As a matter of course it is not possible for a creditor of the limited company to pursue you personally for the same debt.
“Will a Liquidation affect my credit rating?”
In most cases this should not be a problem.
“What are my responsibilities to the Liquidator / Administrator / Supervisor?”
All Directors have a responsibility to provide the Insolvency Practitioner with information they may reasonably require from time to time. This will include both prior to and after the insolvency procedure has commenced. This is likely to include information going forwards on any issues relating to the Company’s assets, creditors or queries about any disputes that may be encountered. In an Administration, the Director will also have a duty to submit a Statement of Affairs within 11 days of the request being made.