bankrupt

[Tazuk]

I hope someone can answer this question please.
I have been asked by a close friend whi is going through a split with her boyfriend, he set up a company and declared both of them directors of which she did all of the paperwork for him etc.
Now he has decided to close the business and there are some outstanding debts, they wish to declare the business bankrupt. What is the legal position of doing this as regards to liabilities etc and theposition of the directors becoming self employed and running a one man band?

Thanks for any feedback

Taz

 

[bwglaw]

I hope someone can answer this question please.
I have been asked by a close friend whi is going through a split with her boyfriend, he set up a company and declared both of them directors of which she did all of the paperwork for him etc.
Now he has decided to close the business and there are some outstanding debts, they wish to declare the business bankrupt. What is the legal position of doing this as regards to liabilities etc and theposition of the directors becoming self employed and running a one man band?

Thanks for any feedback

Taz

Firstly. I would be reluctant to advise through a third party and without the full facts of the situation. Putting the company into liquidation is not as straight-forward as it seems and it is not possible to elaborate in depth here. However, I refer you to the Insolvency Service website at http://www.insolvency.gov.uk which has useful information

As for the liabilities, in short this will be part of the liquidation process and any assets will be sold to set-off any liabilities. All liabilities are put into priority. Not all creditors will get paid. Some liabilities remain with all or a particular Director if they have signed any personal guarantees.

Regarding your point about Director's going into self-employment. This would not normally be a problem, but can be problematic if you seek credit etc. Problems arise if a disqualified Director tries to be a Director of another or a new Ltd Company. When a company is wound-up, it is the company that is 'bankrupt' and this does not automatically prevent the same person to be a Director elsewhere. This may depend on the facts and circumstances of the business/Directors.

If your friend needs further advise they can contact me direct

Jonathan

 

[autolycus]

Technically speaking, only an individual can be decalred "bankrupt". If a ltd company is in a similar position, it goes into liquidation rather than decalring bankruptcy.

There are various types of liquidation - it sound slike the one that will apply in this case is a creditors' voluntary liquidation (that's the term to Google on for more info).

A CVL takes place under the control of an insolvency practitioner. Part of the IP's job will be to investigate the conduct of the directors. This may or may not lead to them being disqualified from holding the office of director for x number of years.

It is an offence for a director to knowingly allow a company to continue trading whilst insolvent, so it is important your friend takes advice asap. First step should be to arrange a (normally free) consultation with an insolvency practitioner.

Dave.

 

[bwglaw]

Technically speaking, only an individual can be decalred "bankrupt". If a ltd company is in a similar position, it goes into liquidation rather than decalring bankruptcy.

There are various types of liquidation - it sound slike the one that will apply in this case is a creditors' voluntary liquidation (that's the term to Google on for more info).

A CVL takes place under the control of an insolvency practitioner. Part of the IP's job will be to investigate the conduct of the directors. This may or may not lead to them being disqualified from holding the office of director for x number of years.

It is an offence for a director to knowingly allow a company to continue trading whilst insolvent, so it is important your friend takes advice asap. First step should be to arrange a (normally free) consultation with an insolvency practitioner.

Dave.

Correct - I wanted to avoid elaborating too much with the technicalities and insufficient facts. The website I mentioned should answer most questions and where to find an Insolvency Practitioner. A company will go 'Into Administration' before liquidation and then confirmed dissolved.

Advice best sought from an Accountant as to whether liquidation is the correct route to take because when in administration it has to be shown that the business cannot be saved and should proceed to liquidation.

Creditors can object to a voluntary liquidation.

 

[Tazuk]

Thanks for the replies i will get her to contact someone i don't thinks it is as complicated as it was first put to me. Her boyfriend who set up the business had told her that the business had folded but he kept it trading and did not release any of the paperwork or finances and has now left her with several thousands of pounds owing to the vat man.
surely this way of working for a director to disclose company info is illegal.

TAZ