The misconceptions of corporate insolvency

Gareth BuckleyBlog

If I liquidate my company will I be able to be a director in the future?

You can be a director of another company after liquidation.  As part of a liquidation, the Liquidator is required to submit a report regarding your conduct as a director to the Secretary of State. Should the Secretary of State deem that you are unfit to be a director based on this report you might be disqualified from acting as a director in the future. However, this is extremely rare and only happens in the most serious cases

Will it affect my credit rating as I’m a director?

Unless you have given personal guarantees to settle the liabilities of the company then it will not affect your personal credit rating.

Do directors become liable for company debts in a liquidation?

The company and the directors are separate legal entities thanks to the concept of limited liability. That means that the directors cannot be pursued for debts owed by the company. The only time a debt can be pursued is when the directors have signed personal guarantees, meaning they have personally agreed to pay the debt if the company cannot.

If I liquidate my company I can I trade a different company with the same name?

This is often the case, but there are a couple of exceptions. The first is where another company has traded under the same name for a period of 12 months prior to the liquidation. The second exemption is where the name is purchased from the liquidator and notice is given to the relevant parties regarding the re-use of the name.

Do the directors personally pay the Insolvency Practitioners fees?

The liquidator will realise the assets of the company; these funds will be paid into a pot from which the costs of the liquidation are settled first. Therefore, unless the company has limited assets the directors will not be asked to personally settle the costs.  It should be very clear at the outset if there are sufficient funds to cover the liquidation, therefore there shouldn’t be any nasty surprises.

Will the company employees receive any money?

Employees can apply to the Redundancy Payments Services (RPS) in respect of sums due regarding outstanding wages, accrued holiday pay, pay in lieu of notice, and redundancy pay. Payments are made from the National Insurance Fund and are subject to statutory limits.  95% of claims are typically paid within 6 weeks of receiving the applications. The RPS then submit a claim in the liquidation and become a creditor in place of the employees.