Company Liquidation

What Are The Risks For A Director?

Firstly let us remove the myth – placing your company into liquidation, administration or entering into a CVA does not affect the director’s personal credit rating. As licensed Insolvency Practitioners and debt experts, we have worked with many directors who worried about the impact of insolvency proceedings on their personal finances.


Personal Liability

A director can become personally liable for the company debt if they haven’t taken the necessary steps (followed the golden rules), when they knew or are considered to have known, that the company was in financial trouble.

This is why it is very important to seek advice early and mitigate any risk as much as possible. Even if a director has become personally liable, there could be a very good reason as to why a certain action was taken.

It is important to document decisions so that they can be relied on at a later date. Any claims against a director can be defended successfully if properly presented.

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What are the golden rules?

Do not increase the level of debt that the company is in.

Treat all creditors equally, do not pay anyone ahead of anyone else.

Do not transfer, move or sell company assets for less than they are worth.


“If I Close A Company, Can I Set Up A New Company?”

The short answer is yes. You are able to still be a director and open up a new company immediately, just not with the same company name or something so similar that anyone from the outside looking in may believe that they are dealing with the same company.

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Director Disqualification

Directors can get disqualified from being a director if the Insolvency Service deem that their conduct has been ‘Unfit’. There are quite specific elements the Insolvency Service will look for such as:

  • A director liquidating a number of companies in a short period of time
  • Failure to pay HMRC over a long period of time
  • Taking significant funds out of the company when not paying anyone else


Seeking advice early will reduce the probability of potentially becoming disqualified. If you are a Company Director and would like free, confidential advice on company debt, The Directors Helpline and JT Maxwell can help


Blog by: JT Maxwell