Helping Company Directors Through Insolvency
Are you a director of a company experiencing insolvency or cashflow issues?
We have compiled a list of insolvency related issues that you may encounter as a director below, if you cannot find the information that you are looking for, please get in touch.
If your company is experiencing cashflow issues, your first step should be to understand and minimise your outgoings as much as possible, cutting out and reducing expenditure in areas that are not currently/immediately beneficial to your business. if your company becomes insolvent you must start formal insolvency proceedings (engage a Licensed Insolvency Practitioner, such as Purnells). You can also consider raising your prices, adjusting your invoice terms to realise cash sooner and look in to ways of deferring debt and large payments to a later date. For more information, please see our section on cashflow issues.
Given a Personal Guarantee?
If you have issued a personal guarantee (PG) and the company becomes insolvent, you are personally liable for that debt should the company fail to meet it's obligations and your personal assets could be called upon to settle the debt. If the company is still solvent and you have not yet obtained Personal Guarantee Insurance, it may be worthwhile, which can cover some/most of the debt should it be called upon, subject to the terms of your guarantee and insurance. A PG is legally binding providing it was drawn up and signed in good faith and understanding of both parties. If the company is being replaced by a phoenix company, you may be able to restructure your guarantee.
If your company has debt to HMRC which you cannot currently settle in full, you may enquire with them about a "Time to Pay Arrangement" whereby you can repay the debt monthly in instalments instead of as a lump sum. For more information, please see our HMRC debt section.
Overdrawn Directors Loan Account?
If your directors loan account is overdrawn, then you are responsible for settling that debt personally to the company. If you are using the directors loan account to obtain "drawings" instead of a full salary from the company (some accountants recommend this to pay a lower dividend tax instead of income tax) and a large enough dividend to cover the debt cannot be generated from profits, the directors must repay all of this debt, unless they themselves follow personal insolvency proceedings. Please see our section on overdrawn directors loan accounts for more information.
A director can be disqualified for any of the following actions:
- Allowing the company to continue to trade whilst insolvent
- Not keeping or ensuring a proper financial accounting
- Not filing correct paperwork with HMRC on time
- Not paying tax owed by the company
- Using company money or assets for personal benefit
A disqualification can last from 2 to 15 years depending on severity, during which time you will not be able to participate in the running of a company in any official role. Please see our section on director disqualification for more information.
Can Directors Claim Redundancy?
Providing a director takes a salary from the company (through the payroll) then that is usually enough to be able to claim redundancy payments. If the director is primarily remunerated through drawings instead of (but still has) a salary, then the Redundancy Payments Office can potentially top up the payments to national minimum wage level providing an official number of contracted hours can be demonstrated. Please see our section on directors redundancy for more information.
Would you like us to give you a call?
Fill in the form and we'll give you a call as soon as we can to discuss your needs in a free initial consultation with a Licensed Insolvency Practitioner. Alternatively give us a call on 01326 340579 if there is an urgency to your needs.