What Happens To A Director of An Insolvent Company?
What Happens To A Director of An Insolvent Company, Once in Liquidation?
Insolvency remains a daunting arena to enter. Many directors hold back seeking advice on the matter not realising they may be trading Insolvently and making their position worse as a director. They fear what happens to a director of an insolvent company without understanding the procedure.
So that we may remove any uncertainty, we briefly outline what the process involves in insolvency and what potential implications may exist for you as a director.
Once you have decided to seek the advice of an Insolvency Practitioner, ensure you note everything said.
Moving forward, you still hold the office of a director until a licensed IP is appointed.
Once the insolvency practitioner assumes appointment, in any liquidation, your occupancy as company director ends. The company ceases trading (unless a trading administration).
As part of the Liquidators duties, the IP will investigate director conduct before their appointment.
Does Insolvency Have an Effect on You?
Limited company status places a legal fence between your personal and company finances. Limited Liability protects directors financially providing they have acted correctly. So they usually are not affected by a company failing. So the company liability provided operates correctly, and no guarantees offered, does not affect your assets.
What Happens To a director of an Insolvent Company -When A Personal Guarantee Exists?
A personal guarantee presents things in a more complicated stance. Guarantees breach the corporate veil. When a company director signs a personal guarantee for say a business loan, this means the holder of the guarantee can use the asset as security.
Can Directors Claim Redundancy?
Employing a director for more than two years, and PAYE paid, directors redundancy is available from the government. You may also claim holiday pay, unpaid wages and other statutory entitlements. For further help view Directors Redundancy.
Overdrawn Director’s Loan Account.- How is it Affected When Company Insolvent?
Upon the liquidator’s appointment, then their responsibility signifies they will liquidate and maximise the assets of the company creditors. If the liquidators know the directors owe money to the company? Then the overdrawn loan account, therefore, requires paying back.
If however, you have a no complaints or disqualification order, there then remains nothing to prevent you from, therefore, holding a Directorship again.