Company Dissolution Ramifications

Dissolution is the formal process of 'striking off' a company from the Companies House register. It is a way of shutting down a company if it is decided that it should no longer trade. ...more

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Company Dissolution Ramifications

Dissolution is the formal process of ‘striking off’ a company from the Companies House register. Once a company has been dissolved, it will no longer exist as a legal entity and all trade will be forced to stop. This process can be straightforward, however, if the dissolution of a company is not handled correctly, it can cause serious ramifications for Directors e.g. Directors disqualification or the issuance of a considerable fine.

Dissolving a company with debts – Are Directors still liable?

The process becomes more complicated when the company owes money, especially if it is unable to pay those debts.

Should a creditor presume your company has not been closed down legitimately or has another reason for arguing against the closure, they can appeal for your company to be restored. If successful, this would then allow them, and any other outstanding creditors, to continue to chase your company for the outstanding debts.

Whilst Companies can be dissolved without going through insolvency proceedings, the Insolvency Service will now have the power to investigate the conduct of a Director of a company that was dissolved without first going through such proceedings.

If their conduct makes them ‘unfit’ to be concerned in the management of a company, the Insolvency Service can apply to the Court for a Disqualification Order.

A Director Disqualification Compensation Order can also be sought where a former Director of a dissolved company has caused loss to creditors.

The Corporate Veil can be lifted and Directors made personally liable in extreme fraudulent cases. With the implementation of the new legislation, it seems likely that as businesses face up to the changes and challenges that 2022 presents, including high energy costs, supply chain issues, staff shortages – we will see an increase in companies facing cash flow issues and in some cases, inevitable Insolvency.

To summarise:

    • The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) bill is in force. So companies that were dissolved can face scrutiny by the Insolvency service if this route was abused.
    • Statutes now specifically prevent companies from being dissolved if a CBILS loan is in place.
    • Director will face scrutiny and if found to have acted inappropriately could ultimately face disqualification.
    • Corporate orders against directors could be made.
    • The Insolvency service is looking at fraud, such as, CBILS loans that were taken when the company was dissolved or newly incorporated.

The abuse, alongside statutes increasing HMRC power has led to the net tightening of struggling businesses, and the available options diminishing.

BBLS loan if taken in a limited company didn’t require Personal Guarantees. However, CBILS, especially those greater than £250,00 required a PG.

With all this pressure it is hard to “see the wood for the trees”… and that’s where we at Bell & Company come in.

More: Are Directors Personally Liable for Company Debts?

If you want to dissolve a company, you need to be sure that the process is handled correctly.

Often with established businesses, there are many factors at play. Bell & Company look at all aspects of you and your business’ finances to ensure the best outcome.

How can Bell & Company Help?

If you are in the process of dissolving your company and are concerned about the personal exposure associated, speak to a Debt Strategist.

Our Team, of professionals from Legal, Accountancy, Financial Services and Insolvency backgrounds can provide guidance that covers all bases. Your interests and protection are always at the forefront of everything we do. Our Specialists can review all options available to you and provide guidance on how best to manage creditors. We can do this while you continue to trade, or protect your personal position as a Director in the event of ceasing to trade.

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