A primary question that many will ask as their Business beings to fail is, “Can I be considered personally liable or be pursued for my  business debts?”

SOLE TRADERS/PARTNERSHIPS
Many people in business will operate as an individual, Sole Trader or Partnership.
If this has been your chosen trading style, it is most likely that any borrowings from Lenders to support your Business will have been issued either in your personal name or that of the Partnership. That being the case, you will no benefit from limited liability status and, resultantly, are liable to be pursued for the full amount of the monies borrowed.

Where a secured business facility that has been issued to an individual(s) Partnership debt falls into difficulty, the subject Lender will work through the sale of any security held in order to seek to reduce the balance owing. Once this has been completed however, the individual(s) are fully exposed and can be pursued for the crystallised shortfall, up to and including Bankruptcy in which case personal assets can be at risk.

It is imperative that anyone in this position prepares themselves pro-actively in order to maximise protection as otherwise, home and other assets of importance could be materially exposed.

LIMITED COMPANIES AND PERSONAL GUARANTEES
If you operate as a Limited Company, then it is likely that any business debt will be taken out in the Company name, i.e. an entirely separate entity from the individuals operating the business

HOWEVER
In the event that you have signed a Personal Guarantee(s) on any facility obtained for the benefit of the Company, for example on a business loan or property lease, and the Company is rendered incapable of meetings its obligations under the terms of the agreement then you, as a Guarantor, will be personally responsible.
If you don’t meet the payment schedule/terms and conditions of the agreement, then the Lender, whether a Bank, Landlord or other, will pursue you personally for the debt and will take whatever action required to recover the full amount due under the Personal Guarantee.

OVERDRAWN DIRECTOR’S LOAN ACCOUNT WHEN COMPANY IN LIQUIDATION

If there is an overdrawn Directors’ Loan Account when a Company goes into liquidation, then the Directors will be held personally liable for repaying that loan. The IP appointed on the liquidation will demand and pursue repayment on behalf of the Creditors.

The IP is fully entitled to take legal action against the Director(s) personally which could, once again, lead to Bankruptcy if repayment cannot be facilitated.

Having an overdrawn Director’s Loan Account in a liquidation situation can also lead to personal Revenue liabilities and investigation if over a certain level.

MOVING FORWARD 

The expert team of Corporate Debt Strategists here at Bell & Company can provide Impartial and tailored advice to suit your needs. Contact us today for a free consultation on 02895 217 373 or contact us  where we can quickly review your case and point out your options.