Still have to pay company in administration?

[Companyquestions]

Hi, just wanted to ask if it is correct that if a company goes into administration is a company owing that company still have to pay the outstanding invoices?

Thanks

 

[liquidauctions]

Yes, the liquidators will take over all the creditors and debtors and collect all money owing to the company and pay all the creditors. You will get a letter from the liquidators of that company very soon!

 

[Companyquestions]

Thanks, I thought a company would still be liable to pay but the company director of the company owig themoney didn't think he would, for some reason.

 

[liquidauctions]

yes he has to pay or he will be in the same boat as the company that has gone bust

 

[Companyquestions]

No.. sorry it is the company director of the company, who owes the money who thought he wouldn't have to pay because the other company has gone into administration.

 

[maxine]

Bit confusing but no matter who the person or company is that owes money to the company that is now in administration it will still need to be paid.

The administrators will attempt to recover as much as possible whilst weighing up the cost to collect.

Quite often companies and individuals don't pay a company in administration or liquidation and the balance gets written off at the end of the exercise if it is not financially economical to collect (not always, but sometimes)

 

[Companyquestions]

I did suggest to the company that owes the money to make an offer to the administrators to pay a reduced amount as he doesn't want to pay the full debt, but he is looking at going into liquidation himself so I think he may just leave the debt.

 

[Companyquestions]

I work for this guy tho and he is a company director of more than one ltd company and I am concerned that if he puts one company into liquidation it will affect the other businesses, as I have just read that a company director of a company that goes bankrupt will not be allowed to set up a new company as a company director but does anything apply if he already is of other businesses?

Thanks

 

[maxine]

An individual person goes "bankrupt" and that will usually mean they cannot be a director of a limited company for a period usually 3-5 years

A company does not go bankrupt but can go into liquidation, be dissolved, or cease to trade and there is not usually anything to stop the previous director from becoming a director of a new business or carrying on with being a director of existing businesses. There are exceptions to this though such as wrongful trading.

So it shouldn't matter much if he puts one company into liquidation as the limited companies are all separate businesses entities.

There may be issues if the companies are dependant on each other in some way, or disruption with cashflow, stock, staff, trading etc.

Hope that helps.

 

[Companyquestions]

we are technically employed by the one that is going to go into liquidtion but I thnk he is going to transfer us all to one of the others.. I don't think there has been any wrongful trading just bad cashflow management.. good to know we should all be ok for a job tho.
Thanks for your help

 

[liquidauctions]

No, i have had a company go under whilst still being director and shareholder for others, if your liquidators think that you tried your best to clear the debt (like offering to pay in installments in court) then you will not become blacklisted. If it is apparent you have gone under just so you dont have to pay a debt then he will be blacklisted.

 

[toddle2u]

if your liquidators think that you tried your best to clear the debt (like offering to pay in installments in court) then you will not become blacklisted. If it is apparent you have gone under just so you dont have to pay a debt then he will be blacklisted.

By saying 'blacklisted' do you mean being disqualified as a Director?

 

[liquidauctions]

Yes you will be on the blacklisted directors list and cant act as a director for any other companies

 

[toddle2u]

Yes you will be on the blacklisted directors list and cant act as a director for any other companies

For this to happen you will have to be disqualified as a Director after action taken by the Insolvency Service. For this to happen there will have to have been a D1 Form submiited by the Liquidator on the Directors conduct and even though only 30% of these get looked at by the Insolvency Service and then only about 30% of these lead to a ban. So it is definately not a given that it will lead to a disqualification

 

[Spongebob]

For this to happen you will have to be disqualified as a Director after action taken by the Insolvency Service. For this to happen there will have to have been a D1 Form submiited by the Liquidator on the Directors conduct and even though only 30% of these get looked at by the Insolvency Service and then only about 30% of these lead to a ban. So it is definately not a given that it will lead to a disqualification

The number of people who are disqualified as a director is tiny. As Toddle says, it involves a complicated process that is rarely used in anything other than obvious cases of outright fraudulent behaviour involving sizeable sums.

The vast majority of directors of companies going bust owing a few grand really do not need to worry about it.

Even the guys who bought MG Rover for a quid and then ran it into the ground while paying themselves millions have not been disqualified!

 

[yorkshirejames]

Rightfully - you ought to pay the monies due. However - do NOT pay into the normal bank account and do NOT send a cheque to the usual address.

In reality - the debt will be sold by the IP to a debt collector (this process itself will take a couple of months) and if you want to "get away with it" it will be easy to deny to the debt collector that the debt exists (whether you wish to do this is down to your own ethics).

I believe that under SFRS (spongebob financial reporting standards) you would give a cash bung to the former director of the company, to ensure that if the debt collector or IP request that he helps with background information his answer is "I can't remember" ;-)

 

[elliotgreen]

You are still liable to honour contractual obligations to those to whom they are owed. Only if your company goes bust can insolvency procedures deal with the matters of non payment. However, if you owe to a company that has gone into liquidator or administration then the liability remains.

 

[yorkshirejames]

You are still liable to honour contractual obligations to those to whom they are owed. Only if your company goes bust can insolvency procedures deal with the matters of non payment. However, if you owe to a company that has gone into liquidator or administration then the liability remains.

Not sure what your post adds that mine didn't, however i'm very impressed that you posted this at 03:00 on a sunday morning!

 

[pmb2009]

Make sure you ask the Administrator to provide copy invoices and proof of deliveries if appropriate. A lot of the time the Administrator will not have this information and will not continue to chase.

That said, morally, if the money is due then it should be paid.