Ltd Company and Personal Bankruptcy

[pub2000]

Hi, please be gentle with me. I am desperate and don't know where to turn any more.

I have no support network and nowhere to turn. Right now I feel like death would be preferable to dealing with any of this, unless there is a way out I am missing?

In October 2023 I took on a pub under a retailer agreement with one of the big breweries which required me to start a limited company of which I am the sole director. I had worked at the venue for several years and was renting the accommodation above it when I took it over. I moved into the accommodation when I left an abusive marriage with over 30k of personal debt as I was unable to rent anywhere due to affordability and the person running the pub at the time was happy to let me live in the accommodation free of charge. I ended up taking the pub on as I felt it was my only alternative option to sleeping on the streets.

For the last 18 months I have run the pub and have also held down a day job which has enabled me to service my personal debts, but my business has debts to HMRC of approximately 10k and there is soon going to be a VAT bill which will only cause this to increase.

I have no personal savings and the business currently has 2k in the bank, most of which will be used to pay holiday pay owed to two employees who are leaving within the next 3 weeks.

I have frequently put my own money into my business bank accounts in an attempt to keep it going and have taken nothing from the business personally. I am not on payroll for the business, as advised by my accountant when I started it.

There have been some changes in my personal circumstances, mainly related to my health and when combining this with the company debts and the fact that I am losing key staff members in the next few weeks I need to move on. If I do not move on I fear the brewery will soon force me to move on. I have no monies due to come back to me from the brewery.

I have managed to find a property with a landlord that will accept me as a tenant despite my financial situation, but I will only be able to pay the rent and the bills if I stop servicing my personal debts. Advice from Stepchange has been to move into the property then declare myself personally bankrupt as I will not qualify for a debt relief order due to too much surplus income. However, I am aware that I cannot be a company director if I am bankrupt.

This leave me in a catch-22 situation as I also cannot afford to liquidate my business. Originally I had planned to vacate the pub then "SpongeBob" the business once the remaining staff had been TUPE'd to the new management company, but from what I am reading this takes time so is not going to be viable if I need to declare personal bankruptcy to survive.

Is there anything I can do or anything obvious I have missed? Or am I destined to sink whatever I try to do?

 

[ChrisCallaghan]

Hi @pub2000 ,

Firstly I'm so sorry to hear about your situation, though I'm glad to hear that you've got accommodation planned and have been taking personal debt advice from StepChange.

It's hard to give you exact answers on a thread like this without knowing more specifics about your situation, however a version of Spongebob's plan is workable in your circumstances - it's just about timing.

As you've identified, once you are declared bankrupt you are banned from being (and acting) as a director for a minimum of 1 year. In your case, you would follow the first steps, including writing to the creditors inviting them to wind up your company, and then once you've been declared bankrupt, you would do nothing further. The company would then continue to exist until either a creditor comes forward to wind up your company, or Companies House dissolve your company for non-filing.

Alternatively you could consider liquidating the company through an insolvency practitioner and then going bankrupt. Whilst this could be considered the cleaner way to deal with the difficulties, a liquidation can be costly, and I'm conscious of your personal financial circumstances.

In either case I think you should take formal advice on this before deciding on how to proceed. I'd be happy to offer you my time, or alternatively you can contact the charity Business Debtline:

Debt advice | Free Debt Advice and Support | Business Debtline

www.businessdebtline.org

 

[Newchodge]

First, please remember there are always ways out. What matters most is your personal circumstances and well-being. Money owed to HMRC is a long way down the priority list.

You have posted on a Sunday and many of the accountant, IP type posters are less around at the weekend, they usually all pile in on a Monday morning. @ChrisCallaghan and @Lisa Thomas are 2 of several who can give you come good advice.

My first thought would be to move into the accommodation, declare personal bankruptcy and notify the brewery that, due to the bankruptcy you can no longer be a dirctor of the business. Let them sort it out. But please wait until Monday before following that, as I am not a professional in this area.

Don't panic and remember: breathe.

 

[pub2000]

Hi @ChrisCallaghan

Firstly, thank you for your kindness. I was fully braced for experienced "business people" to tell me how stupid I have been to get into this situation and I appreciate your gentle words.

I have read your response and take on-board what you have said about SpongeBob being workable. What I am struggling to find clarification of anywhere is what happens to a company that is left with no director? I presume that if I am declared bankrupt I immediately cease to be a director, but everything I can find online says that a company "must" have a director. Therefore I am unclear what would happen to the company if I just declared bankruptcy and ignored it?

 

[ChrisCallaghan]

What I am struggling to find clarification of anywhere is what happens to a company that is left with no director? I presume that if I am declared bankrupt I immediately cease to be a director, but everything I can find online says that a company "must" have a director.

Short answer is that the company will remain listed as active at Companie House with you as a director. You won't be in breach of your bankruptcy restrictions so long as you are not  acting as a director.

 

[pub2000]

First, please remember there are always ways out. What matters most is your personal circumstances and well-being. Money owed to HMRC is a long way down the priority list.

You have posted on a Sunday and many of the accountant, IP type posters are less around at the weekend, they usually all pile in on a Monday morning. @ChrisCallaghan and @Lisa Thomas are 2 of several who can give you come good advice.

My first thought would be to move into the accommodation, declare personal bankruptcy and notify the brewery that, due to the bankruptcy you can no longer be a dirctor of the business. Let them sort it out. But please wait until Monday before following that, as I am not a professional in this area.

Don't panic and remember: breathe.

Hi @Newchodge,

Thank you to you too for reaching out and for your sound advice about waiting for Monday. Unfortunately in my industry Sunday tends to be a day when over-tiredness kicks in and you can find yourself ruminating and massively over-thinking life and the universe.

The brewery know that I am leaving. They have no interest in me or what becomes of my business and only care about finding someone to put into the venue in my place. They are very clear that when you take on a venue under this arrangement you form a Ltd company to reduce their risk and that any problems you run into are yours and yours alone to deal with.

Leaving the venue is actually the easiest part of this... it's what I do with the mess that will follow me that is currently scaring me!

 

[Newchodge]

Hi @Newchodge,

Thank you to you too for reaching out and for your sound advice about waiting for Monday. Unfortunately in my industry Sunday tends to be a day when over-tiredness kicks in and you can find yourself ruminating and massively over-thinking life and the universe.

The brewery know that I am leaving. They have no interest in me or what becomes of my business and only care about finding someone to put into the venue in my place. They are very clear that when you take on a venue under this arrangement you form a Ltd company to reduce their risk and that any problems you run into are yours and yours alone to deal with.

Leaving the venue is actually the easiest part of this... it's what I do with the mess that will follow me that is currently scaring me!

Actually, runnung thriugh a limited company is the best situation for you. None of the debt is yours. Once you are personally bankrupt the company can do nothing and the brewery will have to sort it all out.

 

[Elliot Green]

Short answer is that the company will remain listed as active at Companie House with you as a director. You won't be in breach of your bankruptcy restrictions so long as you are not  acting as a director.

Chris - how can you be a de jure Director and not *act* as a director?

 

[ChrisCallaghan]

Therefore I am unclear what would happen to the company if I just declared bankruptcy and ignored it?

Personally I would not recommend this. Much better to get the company's affairs in order before you make yourself bankrupt would be considered the sensible approach, even if it's just following the first steps of Spongebob's guide, or taking more formal advice from Business Debtline or a representative of an insolvency practice like myself.

If you are worried that this might delay how quickly you can make a bankruptcy application, you can always apply for a Debt Respite Scheme (aka Breathing Space) to give 60 - 90 days protection from your personal creditors whilst you get your affairs in order - link below, plus StepChange can offer guidance on this.

Debt Respite Scheme (Breathing Space) guidance for creditors

www.gov.uk

 

[ChrisCallaghan]

Chris - how can you be a de jure Director and not *act* as a director?

I would love your thoughts on this Elliot!

Two opposing problems:

1. A company cannot be left without a director under the Companies Act
2. A bankrupt (who in this case is the sole director I assume) cannot be a director.

My practical answer has always been as given to OP. If you cannot liquidate due to affordability issues, invite creditors to wind, push on with your bankruptcy application, and then just leave the company as is till a creditor comes forward to wind, or Companies House dissolve for non-filing.

Would you suggest any differently Elliot?

 

[Newchodge]

I would love your thoughts on this Elliot!

Two opposing problems:

1. A company cannot be left without a director under the Companies Act
2. A bankrupt (who in this case is the sole director I assume) cannot be a director.

My practical answer has always been as given to OP. If you cannot liquidate due to affordability issues, invite creditors to wind, push on with your bankruptcy application, and then just leave the company as is till a creditor comes forward to wind, or Companies House dissolve for non-filing.

Would you suggest any differently Elliot?

Just my unprofessional tuppeny worh. You are talking about what happens to the Company. I think the oP is worried about what happens to the business. In this case, given the structure of brewery owned pubs, run by a limited company, the onus will be on the brewery because they will not want the pub to close for any period of time, so they will get a temporary manager in to run it, the staff will transfer to the brewery and the OP need not worry about it.

 

[ChrisCallaghan]

Good point @Newchodge .

@pub2000 , have you talked with the brewery about managing your exit? The timings about what to do with your Ltd and your bankruptcy application will stem from this.

 

[pub2000]

I'm sorry, I should probably be clearer in my writing. I have dyspraxia which sometimes makes it difficult for me to organise thoughts that make perfect sense in my head into written words.

I am not overly concerned about the business. The brewery will either send someone in to take over or will close the venue down. Seeing as by my last day I will only have two employee left, one who has been with me for less than 6 months and one who would qualify for a small amount of redundancy as he has worked a very low number of hours for just over 2 years, am not overly worried about what happens within the venue.

My concerns are more around what happens to my Ltd company. The pub and how it runs will cease to be my responsibility long before I am able to sort out the affairs of my company.

 

[pub2000]

Good point @Newchodge .

@pub2000 , have you talked with the brewery about managing your exit? The timings about what to do with your Ltd and your bankruptcy application will stem from this.

They know that I am going and I have a phone call with them on Monday to finalise timings.

I am expecting to be here for another month and during that time they will either take a decision to close the venue (leaving me with one staff member to make redundant) or will bring someone else in to manage and the remaining 2 staff members will be TUPE'd over to that person's company.

They have no interest in what happens to my Ltd company and have already told me that this is my issue to resolve.

 

[ChrisCallaghan]

Thank you for clarification @pub2000

I stand by my first comments:

Yes, you can follow Spongebob's guide to a certain extent, but that you would need to follow the first steps before you apply to make yourself bankrupt and are subject to a directors ban.

As helpful as forums like this can be, I also think you'd benefit from taking formal advice on these options and processes, either from an insolvency practice (such as myself or other forum members) or through the charity Business Debtline.

 

[Newchodge]

They know that I am going and I have a phone call with them on Monday to finalise timings.

I am expecting to be here for another month and during that time they will either take a decision to close the venue (leaving me with one staff member to make redundant) or will bring someone else in to manage and the remaining 2 staff members will be TUPE'd over to that person's company.

They have no interest in what happens to my Ltd company and have already told me that this is my issue to resolve.

If the brewery closes the venue, your company, not you, should pay outstanding wages, notice pay, accrued holday pay and any redundancy pay due. If your company has no money it cannot pay. If you, personally, cannot afford to pay for liquidation, the staff should make a claim to the ET for the monies owed and, when they win that claim, the government will pay the staff.

 

[ChrisCallaghan]

If the brewery closes the venue, your company, not you, should pay outstanding wages, notice pay, accrued holday pay and any redundancy pay due. If your company has no money it cannot pay. If you, personally, cannot afford to pay for liquidation, the staff should make a claim to the ET for the monies owed and, when they win that claim, the government will pay the staff.

To be fair to most breweries, in my experience most of the major ones seem to have good procedures in place, such as getting temporary managers in and TUPE-ing the staff. It sounds that will be the case here if OP manges their exit.

 

[Elliot Green]

Hi, please be gentle with me. I am desperate and don't know where to turn any more.

I have no support network and nowhere to turn. Right now I feel like death would be preferable to dealing with any of this, unless there is a way out I am missing?

In October 2023 I took on a pub under a retailer agreement with one of the big breweries which required me to start a limited company of which I am the sole director. I had worked at the venue for several years and was renting the accommodation above it when I took it over. I moved into the accommodation when I left an abusive marriage with over 30k of personal debt as I was unable to rent anywhere due to affordability and the person running the pub at the time was happy to let me live in the accommodation free of charge. I ended up taking the pub on as I felt it was my only alternative option to sleeping on the streets.

For the last 18 months I have run the pub and have also held down a day job which has enabled me to service my personal debts, but my business has debts to HMRC of approximately 10k and there is soon going to be a VAT bill which will only cause this to increase.

I have no personal savings and the business currently has 2k in the bank, most of which will be used to pay holiday pay owed to two employees who are leaving within the next 3 weeks.

I have frequently put my own money into my business bank accounts in an attempt to keep it going and have taken nothing from the business personally. I am not on payroll for the business, as advised by my accountant when I started it.

There have been some changes in my personal circumstances, mainly related to my health and when combining this with the company debts and the fact that I am losing key staff members in the next few weeks I need to move on. If I do not move on I fear the brewery will soon force me to move on. I have no monies due to come back to me from the brewery.

I have managed to find a property with a landlord that will accept me as a tenant despite my financial situation, but I will only be able to pay the rent and the bills if I stop servicing my personal debts. Advice from Stepchange has been to move into the property then declare myself personally bankrupt as I will not qualify for a debt relief order due to too much surplus income. However, I am aware that I cannot be a company director if I am bankrupt.

This leave me in a catch-22 situation as I also cannot afford to liquidate my business. Originally I had planned to vacate the pub then "SpongeBob" the business once the remaining staff had been TUPE'd to the new management company, but from what I am reading this takes time so is not going to be viable if I need to declare personal bankruptcy to survive.

Is there anything I can do or anything obvious I have missed? Or am I destined to sink whatever I try to do?

Who are the company shareholders?

I would love your thoughts on this Elliot!

Two opposing problems:

1. A company cannot be left without a director under the Companies Act
2. A bankrupt (who in this case is the sole director I assume) cannot be a director.

My practical answer has always been as given to OP. If you cannot liquidate due to affordability issues, invite creditors to wind, push on with your bankruptcy application, and then just leave the company as is till a creditor comes forward to wind, or Companies House dissolve for non-filing.

Would you suggest any differently Elliot?

An approach is to appoint another de jure director before bankruptcy. If that is not possible then in the CVL/strike off if a company is not viable and insolvent.

 

[ChrisCallaghan]

Just playing devil's advocate here Elliot....

But what if no one is willing to go on as a director, current director and cannot afford liquidation, and doesn't wish to wait for 3 months (i.e. the time required ro have been ceased to trade before submitting a DS01) before applying to be made bankrupt?

 

[pub2000]

If the brewery closes the venue, your company, not you, should pay outstanding wages, notice pay, accrued holday pay and any redundancy pay due. If your company has no money it cannot pay. If you, personally, cannot afford to pay for liquidation, the staff should make a claim to the ET for the monies owed and, when they win that claim, the government will pay the staff.

Thank you for clarifying the position. When I said "me" I meant my company. There is just enough money in the business bank accounts to cover what would be outstanding to staff if the brewery close the venue down.

 

[pub2000]

Who are the company shareholders?

An approach is to appoint another de jure director before bankruptcy. If that is not possible then in the CVL/strike off if a company is not viable and insolvent.

I am the only shareholder. There is nobody else who would be willing / able to take on the role of company director. I literally have no support network, either professionally or personally with any of this, hence my panic and desperation.

 

[Elliot Green]

Just playing devil's advocate here Elliot....

But what if no one is willing to go on as a director, current director and cannot afford liquidation, and doesn't wish to wait for 3 months (i.e. the time required ro have been ceased to trade before submitting a DS01) before applying to be made bankrupt?

I do not see why what someone *wishes* to do is relevant to matters of such compliance. It appears to produce a breach of Section 154 of the Companies Act.

Perhaps I might not wish to pay a debt I owe and appeal for a waiver, but my creditors might consider this to be sufficiently audacious and respond with the vernacular response in Arkell v Pressdram.

 

[pub2000]

I'm sorry, I feel like I'm causing fall-out now which was never my intention.

All I wish to do is try to survive this and move on with my life, preferably with a roof over my head and not being prosecuted for anything which makes that roof the ceiling of a prison cell.

I'll leave this forum now and I thank you all for your help and advice.

 

[Newchodge]

I'm sorry, I feel like I'm causing fall-out now which was never my intention.

All I wish to do is try to survive this and move on with my life, preferably with a roof over my head and not being prosecuted for anything which makes that roof the ceiling of a prison cell.

I'll leave this forum now and I thank you all for your help and advice.

Please don't worry, they are just having a little professional spat. Happens all the time.

I really don't think you have much to worry about, perhaps arrange a chat with @ChrisCallaghan to put your mind at rest.

 

[japancool]

I have no support network and nowhere to turn. Right now I feel like death would be preferable to dealing with any of this, unless there is a way out I am missing?

You've done the right thing by seeking advice. I have nothing to add to the advice given in this thread except - don't panic. It all seems bleak at the moment, but remember one key thing.

The pub's debts are the limited company's debts, not yours. The only things you need to worry about are any debts you've personally guaranteed (assuming no misconduct). Everything else will disappear when and if the company is dissolved. Focus on your own financial situation and mental health.

Debt collectors will not be turning up at YOUR door to collect business debts that you are not liable for. If they do, they cannot takes goods that don't belong to the business. They're not going to suddenly make you homeless, if you keep up with rent at your new home., or freeze your personal bank account without a court order. And unless you committed fraud, you're not going to jail. We abolished debtors' prison about a century ago.

And if you have to be declared bankrupt, don't panic about that either. It makes life a little harder depending on your restrictions, and you can't be a director for a year but that's survivable. And you come out the other side with a relatively (although not entirely) clean sheet. Always, always take advice if you are planning or under threat of this, but speaking from experience, it's not as bleak as it once was. My own bankruptcy finally fell off my credit record in March.

I wish you good luck.

 

[Elliot Green]

I'm sorry, I feel like I'm causing fall-out now which was never my intention.

All I wish to do is try to survive this and move on with my life, preferably with a roof over my head and not being prosecuted for anything which makes that roof the ceiling of a prison cell.

I'll leave this forum now and I thank you all for your help and advice.

Don't worry, there is not even a hint of a spat here; just an academic discussion.

 

[japancool]

I would love your thoughts on this Elliot!

Two opposing problems:

1. A company cannot be left without a director under the Companies Act
2. A bankrupt (who in this case is the sole director I assume) cannot be a director.

My practical answer has always been as given to OP. If you cannot liquidate due to affordability issues, invite creditors to wind, push on with your bankruptcy application, and then just leave the company as is till a creditor comes forward to wind, or Companies House dissolve for non-filing.

Would you suggest any differently Elliot?

When I was declared bankrupt, the advice given to me by the Official Receiver was to immediately resign (as I hadn't done so when my bankruptcy took effect), as that was the only legal option available - doing pretty much anything else would probably constitute acting as a director, which I wasn't legally able to do.

 

[pub2000]

When I was declared bankrupt, the advice given to me by the Official Receiver was to immediately resign (as I hadn't done so when my bankruptcy took effect), as that was the only legal option available - doing pretty much anything else would probably constitute acting as a director, which I wasn't legally able to do.

@japancool were you the sole director and share holder when you resigned?

 

[japancool]

@japancool were you the sole director and share holder when you resigned?

Yes, I was. The main thing was just that I had already been declared bankrupt, so I wasn't legally allowed to be a director anyway, I couldn't remain in that position.

Don't take this as legal advice though - I would, as always, recommend you take advice on it, I'm just relating what happened to me.

 

[pub2000]

Yes, I was. The main thing was just that I had already been declared bankrupt, so I wasn't legally allowed to be a director anyway, I couldn't remain in that position.

Don't take this as legal advice though - I would, as always, recommend you take advice on it, I'm just relating what happened to me.

Of course, but I'm interested in personal experience as there doesn't seem to be a clear blue print for this situation!

May I ask what then happened to your company?

 

[ChrisCallaghan]

I'm sorry, I feel like I'm causing fall-out now which was never my intention.

All I wish to do is try to survive this and move on with my life, preferably with a roof over my head and not being prosecuted for anything which makes that roof the ceiling of a prison cell.

I'll leave this forum now and I thank you all for your help and advice.

Don't mind me and @Elliot Green , just professional back and forth.

 

[japancool]

Of course, but I'm interested in personal experience as there doesn't seem to be a clear blue print for this situation!

May I ask what then happened to your company?

Oh, it was eventually struck off and that was the end of that. Companies House will eventually move to do that if it doesn't file its annual statement anyway.

 

[pub2000]

Don't mind me and @Elliot Green , just professional back and forth.

Apologies for my earlier message. I'm feeling a little fragile at the moment and am perhaps being a bit over-sensitive. Was worried I'd joined something new to me and immediately caused upset.

 

[Newchodge]

Apologies for my earlier message. I'm feeling a little fragile at the moment and am perhaps being a bit over-sensitive. Was worried I'd joined something new to me and immediately caused upset.

That is wholly understandable. I am afraid some of us hang around here too long and occasonally act as if we are meeting in a pub, with the concomitant fallout.

 

[pub2000]

Oh, it was eventually struck off and that was the end of that. Companies House will eventually move to do that if it doesn't file its annual statement anyway.

You make it sound so simple! May I ask if your company had debts when you resigned?

 

[japancool]

You make it sound so simple! May I ask if your company had debts when you resigned?

Yep. In fact, some of the debts had had their personal guarantees called in, so had transferred over to me, but some hadn't. The ones transferred to me were wiped out when I was declared bankrupt, and the company's disappeared when the company was struck off.

One important thing to note though is that I had no excess income at the time, so even though was under an income payments agreement for a year after bankruptcy, I ended just having to pay £27 a month to the insolvency service for that time. If you have excess income, you may have to pay more, so it's really important to take advice.

And remember, although it happened this way for me, that doesn't mean this is how it will go for everyone.

 

[Gyumri]

I have managed to find a property with a landlord that will accept me as a tenant despite my financial situation, but I will only be able to pay the rent and the bills if I stop servicing my personal debts.

You haven't mentioned anywhere about what personal debts you are worried about - and if you have any that you cannot service by sensible discussion then a creditor will need to serve a statutory demand on you personally in which case if you don't apply to set it aside - which you can do yourself by email to the bankruptcy court - then after about a year a hearing will be held to see if an order should be made.

So I would not apply yourself to make yourself bankrupt as that would be pouring money down the drain and would only make a rod for your own back for no good reason.

What I am struggling to find clarification of anywhere is what happens to a company that is left with no director?

There is no need to resign but to answer your point the Secretary of State can require shareholders to appoint a director from among themselves to serve as a director.

I would however remain as a director to deal with any enquiries from companies house or HMRC to say that the company has no money and is dormant. Let it remain dormant. The debts of the company as @Newchodge has stated are not your personal concern.

My concerns are more around what happens to my Ltd company.

Who gives a fig about your Ltd? You can start another one if needed for £16 unless the filing fee has increased.

Just start afresh with your new landlord and start pulling pints if that's what you are good at.

 

[japancool]

So I would not apply yourself to make yourself bankrupt as that would be pouring money down the drain and would only make a rod for your own back for no good reason.

How can you say that without knowing any details of what his personal debts are, and whether they are covered by the CCA?

 

[Lisa Thomas]

How can you say that without knowing any details of what his personal debts are, and whether they are covered by the CCA?

Only someone licensed by the FCA can give Bankruptcy advice...

 

[japancool]

Only someone licensed by the FCA can give Bankruptcy advice...

Yup. This is why I keep reiterating that I'm only relating what happened to me - there is absolutely no guarantee that any other bankruptcy proceeding will go the same way, and that the poster needs expert advice.