Reactive
Reactive is the only word that comes to mind when I think of the number of directors reacting to the fallout of COVID-19. The Bounce Back, Loans & Directors Disqualification, seems to be the only thing anyone wants to talk about these days, and frankly, I am not surprised.
My name is Natasha and I have been in the personal and corporate world for the last 16 years and I can honestly say; we are moving in un-nerving and un-precedented times.
As a firm, we are starting to see a record number of businesses cease trading and applying for voluntary liquidations.
Alarmingly, we are also seeing a concerning number of directors applying to place their firms into a dissolution/strike-off.
Directors are frantically trying to close down their businesses as a way of trying to ease the concerns around the Bounce Back loan repayments.
Director Duties
It is crucial I bring to your attention that being a Company Director of a Limited has legal responsibility and duties.
It is the responsibility and duty of a director to act appropriately and be able to validate that they have operated the business using sound management and made decisions in the best interest of all stakeholders.
If the director believes the company to be insolvent, it is the director’s responsibility to ensure the business and third-party businesses (stakeholders) are not further negatively and/or financially impacted by the insolvent company.
Once a director becomes aware of the possibility that the company could be insolvent, they must seek professional advice, failure to do so could have serious personal implications.
If this is what you are thinking or have been advised:
“All I/you have outstanding is a bounce back loan that has been guaranteed by the government, and I/you don’t have a personal guarantee, so I/you can simply dissolve the company at Companies House”.
This right here is not only irresponsible thinking as a director or deeply concerning advice from a professional, but also unethical, and you are breaking the law.
The following is an extract from a DS01 form required to strike a company of the register:
“Failure to notify interested parties is an offense which is punishable by up to 12 months in prison (for English or Welsh companies) or six months in prison (for Scottish or Northern Irish companies). It is advisable to obtain and retain some proof of delivery or posting of copies to notifiable parties.”
If you wish to read more about the DS01, please visit:
Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021
In short, this bill simply allows creditors to personally pursue directors and disqualify directors from being directors in the future. Additionally, the creditors could legally pursue directors in the event of mistreating company funds.
Furthermore, this bill gives creditors the power to pursue the director for an outstanding Bounce Back Loan legally; in this case, the likelihood of the creditor personally seeking the director is highly likely as you have, personally once removed the business that was liable for the debt in the first place.
In reality, by dissolving your company, you have placed yourself into a personal liability for the debt.
It is straightforward; creditor action is triggered when a director attempts to avoid an insolvent solution by trying to dissolve the business at the company’s house.
For more information on the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, visit:
https://bills.parliament.uk/bills/2861
To conclude, if you believe your company is insolvent, seek guidance and support.
The Bounce Back Loans & Directors Disqualification
As the fallout of COVID-19 unfolds, we will see The Bounce Back Loans & Directors’ Disqualification go hand in hand where directors are not acting compliantly and taking responsibility for their business.
It is okay that you took a bounce-back loan; it’s okay to be struggling with the repayments; it’s also okay to ask for help.
Reactive
Let’s become Proactive and deal with the issues head-on and in the right way.
Frequently Asked Questions:
Q. Can I dissolve my company if my business is insolvent and has debts?
A. Surprisingly, you cannot dissolve your company if it has debts – you must seek guidance in insolvency solutions.
Q. Will it impact my credit rating If I voluntarily liquidate my business?
A. In short, no, provided you have not personally guaranteed any debts.
Q. Can I be a director again in the future?
A. Indeed you can, providing you have not been disqualified
Q. Can I use the same company name if I close my business and start again?
A. You cannot; for guidance on this, please contact us.
Contact us or another insolvency specialist if you believe your company to be insolvent; don’t take matters into your own hands by attempting to dissolve your business.
To learn more about Company Money Worries https://companymoneyworries.co.uk/
Contact Company Money Worries on 0330 022 5911, or you can visit us at:
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