Dissolving a Company with Debts

?Are YOU as a Director liable?

If you’re wanting to dissolve your company, you need to ensure that the dissolution process is handled correctly. Often with established businesses, there are many factors at play, especially when the company owes money and is unable to pay those debts.

Ramifications if there are debts attached:

1.?Should a Creditor believe your company has not been closed down legitimately or has another reason for arguing against the closure, they can appeal for your company to be restored. If successful, this would then allow them, and any other outstanding Creditors, to?continue to chase your company for the outstanding debts.

2. Whilst companies can be dissolved without going through insolvency proceedings, the Insolvency Service will now have the power to investigate the conduct of a Director of a company that was dissolved without first going through such proceedings.

3. If the conduct of the Director is deemed to be ‘unfit’ concerning the management of a company, the Insolvency Service can apply to the Court for a Disqualification Order. A Director Disqualification Compensation Order can also be sought where a former Director of a dissolved company has caused loss to Creditors.

4. The Corporate Veil can be lifted, and Directors made personally liable in extreme fraudulent cases. With the implementation of new legislation, it seems likely that as businesses face up to the changes and challenges that 2022 presents we will see an increase in companies facing cash flow issues and in some cases, inevitable Insolvency.

ASPECTS TO NOTE:

• Statutes now specifically prevent companies from being dissolved if a CBILS loan is in place.
• The Insolvency Service is looking at fraudulent conduct, such as CBILS loans taken when the company was dissolved or newly incorporated.
• The abuse, alongside statutes increasing HMRC power, has led to the net tightening of struggling businesses and the available options diminishing.

If taken in a limited company, BBLS loan didn’t require Personal Guarantees. However, CBILS, especially those greater than ￡250,00, required a Personal Guarantee.

If you are planning to dissolve your company and would like to know your options, then give us a call on?0330 159 5820?or contact us via email: [email protected].