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Overdrawn director’s loan account and the insolvency process

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It is very often the case that when directors of an insolvent company come to us for initial advice on the options available, the fact that there is an overdrawn director loan account [DLA] is disclosed. Loans v Remuneration When businesses are in distress, directors frequently take loans from the company rather than salary or bonuses because of the need to pay tax and national insurance to HM Revenue & Customs on such remuneration. Given the financial and cash-flow pressures most companies experience in the run-up to a formal insolvency procedure, such a course of action is understandable, but does lead to uncomfortable conversations with directors. The overdraw DLA represents an asset of the company, a debtor which a liquidator, administrator, supervisor of a Company Voluntary Arrangement [CVA], will seek to recover. The problems faced by a director with an overdrawn DLA of over £10,000 are further compounded by the…

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Can I close down/dissolve/strike off a company which still has debts?

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The simple answer is YES, subject to a number of rules and qualifications. In order to bring about a cessation of the company’s legal identity, the protocol as clearly set out on the Companies House website needs to followed. Any director who does do not follow the rules regarding who must be informed of the intention to have the company struck off the Register can face a fine and possible prosecution and imprisonment. Directors can only strike off the company if it: has not traded or sold off any stock in the last 3 months has not changed names in the last 3 months is not threatened with liquidation has no agreements with creditors, for example a Company Voluntary Arrangement (CVA) If the company does not meet these conditions, the Directors will have to voluntarily liquidate the company instead. So, before applying to Companies House to strike off the company,…

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Bounce Back Loans and Insolvent Companies

Bounce Back Loans and Insolvent Companies

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Did you buy a Rolex with the monies you got from the Bounce Back Loan Scheme [BBL]? Or perhaps a second-hand Porsche? If so, you are probably guilty of fraud under the terms of the Government’s BBL scheme-notwithstanding the fact that your company is maintaining the monthly repayments due to the accredited lender. This article is not looking at out-and-out fraud, but rather will seek to concentrate on the possible pitfalls that Directors may face when such loan cannot be repaid by the company which is insolvent and may well need to go into a formal insolvency procedure. Let us remind ourselves of the history and main features of the BBL scheme. The Department for Business, Energy and Industrial Strategy (DBEIS) launched the BBL scheme on 4 May 2020, offering loans of up to £50,000, or a maximum of 25% of annual turnover, to support businesses during the COVID-19 pandemic….

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Declaration of Solvency

What is a Declaration of Solvency?

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A Statutory Declaration of Solvency [the Declaration] is a key document in the liquidation process for a Members’ Voluntary Liquidation [MVL]. An MVL is a solvent liquidation procedure where, from the outset, it is envisaged that all creditors will be paid in full. Prior to the passing of the Special Resolution by the Shareholders to place the company into liquidation, both directors [if there are only 2] or a majority of directors [if there are more than 2] must declare before a solicitor the Declaration stating that the directors have made a full enquiry into the affairs of the company and are satisfied that it will be able to settle all its debts [together with Statutory Interest at 8% per annum payable to outstanding creditors] within 12 months of the commencement of the MVL. Under the Insolvency Act 1986 [the Act] it is a criminal offence for a company director…

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buying companies in liquidation

A Guide to Buying Companies in Liquidation and Administration

By Tips & Advice One Comment

If you are considering buying companies in liquidation or administration there are various important considerations to make, especially as an insolvent company will have been facing financial problems, leaving you with a raft of challenges to overcome before you can think about getting the business back on track and start making a profit. With this in mind, here’s a look at everything you should be bearing in mind when buying companies in liquidation and administration.

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What is a Pre pack Sale in Administration in the UK?

What is a Pre pack Sale in Administration in the UK?

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A Pre pack Sale is the sale of all or substantially all of the business and assets of a company that has previously entered into Administration. The sale quite often takes place on the first day of the Administration as the marketing of the business and negotiation of the sale terms has taken place prior to the appointment of the Administrator. Hence the “pre-packaged” nature of the transaction. A Pre pack is sometimes known as an “accelerated M & A” process.

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