To answer the question: If my company goes into liquidation, can they make me bankrupt?, let us home in on four key words.
This article assumes that the context is an insolvent liquidation of a limited company incorporated in England & Wales, ‘Compulsory’ or ‘Voluntary’. Having said that, the principles will apply in other insolvency contexts.
Secondly, we are assuming that ‘me’ means a director of the company in liquidation, either at the time of liquidation, or during the period prior to liquidation that is subject to investigation or enforcement action.
Under Insolvency legislation and UK law, only a Court can make an Order to adjudge an individual bankrupt, (usually) as a result of a Petition presented to the court by a legitimate creditor who has the necessary rights to enforce against the individual. An individual is always entitled to defend his/her position via a bankruptcy hearing. So, it should never happen without your knowledge.
If someone can pursue you through the bankruptcy courts to recover a sum of money that is proven to be properly due, which will potentially result in a dramatic effect on your finances and personal status, it would be useful to know who ‘they’ might be. The short list below is not exhaustive, but serves to illustrate the areas of risk or concern to company directors.
‘They’ might include –
What about the protection afforded to directors by ‘Limited company status’?
Yes this is real, but there are many ways in which you can lose this protection. The above lists various situations where what is often referred to as ‘the corporate veil’ can be ‘pierced’!
Beware that there may be trouble ahead. Our Business Recovery and Insolvency Team would be pleased to talk to directors regarding this subject to see how we can help.
This blog does not constitute specific professional advice. You should seek independent qualified professional advice on any specific query you may have in connection with this topic.
Posted by Press Release on March 24, 2017
Philip Hammond's Spring Budget, with its U-Turn on National Insurance Contributions (NICs), alienates the very businesses the government should be encouraging, claims Top 40 accountants, Bishop Fleming. Matthew Lee, Managing Partner at Bishop Fleming, described…
Posted by James Finnegan on March 23, 2017
SME deal making is surprisingly buoyant in the face of uncertainty over Brexit and what looks increasingly like a protectionist agenda in the US. The expectation was that UK mergers & acquisition (M&A) deal volumes…