Liquidating business issues
Although directors are not normally held responsible for the debts of a limited company, if the court finds you guilty of wrongful trading then you may be asked to assume liability for the money the company owes.
This is a very real possibility if you continue to trade while knowingly insolvent and therefore fail to adequately fulfil your duties as a director.
After discussing your situation with an insolvency practitioner you may find that there are more suitable solutions than liquidation available which may either allow the company to continue trading, or to maximise the return to creditors.
This could involve negotiating with creditors and entering into a Company Voluntary Arrangement (CVA) to reduce monthly outgoings, or placing the company into pre-pack administration should the directors wish to purchase assets of the business and start up again.
Furthermore, having an insolvency practitioner handle the process means you can avoid much of the hassles and headaches associated with being wound up and forced into compulsory liquidation.
The directors of the insolvent company can also legally lodge a petition to have the company wound up, but this is usually handled through a voluntary liquidation instead.
If your company fits more than one of the following criteria then it could be at risk of being forced into compulsory liquidation: After the compulsory liquidation is underway the process of selling the company’s assets begins, while all litigation involving the company usually ceases.
For the director of a company facing the prospect of liquidation, either through voluntary or forced means, it is undoubtedly a stressful time.
Not only does this have a huge emotional impact seeing the business you have worked so hard to build failing, but the loss of your business could also mean the loss of your main or only source of income.