Once an insolvency practitioner is appointed, you will hand over control of the company and its ongoing affairs to them. Your new role and responsibilities will be to provide everything they may require to complete the liquidation process. This can include company records, financial documentation, asset information, and contracts and agreements.
Although going through liquidation can be a distressing time, liquidating an unsuccessful company can bring a sense of relief, as it resolves financial obligations, creditor pressures, and liabilities. Overall, while the process may be challenging, liquidating your company will give you a fresh start and the freedom to move on – whether it be starting a new company or pursuing an alternative career path.
Can a Director Be Investigated If Their Company Enters Liquidation?
Yes, a director can be investigated when a company enters liquidation. Once an insolvency practitioner has been appointed, they have the authority to examine the circumstances surrounding the company’s financial decline. The insolvency practitioner will investigate the conduct of the director(s) and compile their findings into a report, known as a ‘director conduct report.’
The investigation may include interviews, a review of financial management, trading practices, compliance with laws and regulations, and conflicts of interest. It may even involve gathering information from employees in various positions and levels of hierarchy in the organisation.
If any evidence of director misconduct is found, this will then be submitted to the Insolvency Service for evaluation. A decision will be made on whether you will face the prospect of disqualification proceedings and therefore a formal disqualification under the Company Directors Disqualification Act (CDDA).
Can a Director Resign From a Company in Liquidation?
You can resign from your role as a company director while the liquidation process is ongoing; however, this will not absolve you of your responsibilities. You will still need to provide the insolvency practitioner with any documents or information they may need for their investigation, and cooperate by attending interviews if required.
It is also important to note that even after your resignation, you will remain responsible for any actions taken while you were acting as the director, including:
- Company Compliance: This includes ensuring that the company has adhered to all relevant legal and regulatory requirements, during your tenure as director.
- Debts and Liabilities: As the director, if you have provided personal guarantees for any loans or financial obligations, creditors may still be able to pursue you for those amounts, regardless of your resignation.
- Misconduct: If it is identified that you have been involved in any misconduct or wrongdoing during your time as the director, the insolvency practitioner can still act against you. This can include reporting you to the authorities, pursuing legal claims, and disqualifying you from acting as a director in the future.
Can a Director Become a Director of a New Company After Liquidation?
Yes, you can set up another limited company after your previous company has been liquidated, but there are important considerations to keep in mind. You may need to consider the extent of the debts owed by your liquidated company, as outstanding obligations may impact your ability to move forward successfully, particularly in terms of re-engaging with suppliers or obtaining favourable credit terms.
If you participated in wrongful or fraudulent trading in your previous company, you could be banned from acting as a company director for up to 15 years. With this in mind, you will need to ensure that any disqualification period ends before starting a new company.
Can a Liquidated Company’s Name Be Reused?
In most circumstances, you cannot reuse your liquidated company’s name or a similar trading name, which could mislead the public into thinking it is the same company, for up to five years after the liquidation. This is prohibited under Section 216 of the Insolvency Act 1986, and failing to comply with this law may result in fines and even imprisonment. You may also be held personally liable for the debts of the new company if it is found to have reused the liquidated company’s name.
There are, however, some circumstances where exceptions will be made that allow you to reuse the company’s name or a similar name:
- If the company name belongs to another pre-existing company you have owned for at least 12 months, before the current company went into liquidation. The other company also has to have traded for the whole of the 12 months before the liquidation.
- If your new company purchases the old company from the liquidator, including its debts. This could be the purchase of a substantial part of the company or the company in its entirety. If you take this route, you need to inform all creditors within 28 days of purchase and place a notice in the Gazette.
- If you apply for permission to reuse the name from the court, this application must be made within seven days of the liquidation.
