Cease Trading or Continue Insolvent?
If your business is insolvent, i.e. it can’t pay its debts, or if you cease to trade the business and it won’t be able to pay its debts in the future, then it is important you seek advice as early as possible to minimise further creditor losses. That personal exposure can come in all sorts of guises, depending on which type of entity your business trades through.
If you trade via a limited company, then the exposure could lie within any one of or a combination of the following:
- Personal guarantees – usually to banks or suppliers
- Overdrawn directors loan accounts
- Committing insolvency offences; trading insolvently, preferential payments, selling assets at an undervalue
If you do have a limited company which is insolvent and you wish to cease to trade, then the following solutions could help achieve the desired outcome:
- Creditors Voluntary Liquidation
- Compulsory liquidation
- Administration
If you are trading as a sole trader or partnership then you will be personally liable for the debts that remain unpaid. As such, in these scenarios there isn’t really a need to instigate a procedure for the business however you will personally need to address the debts which would be via any of the following:
- Full and Final Settlements
- Individual Voluntary Arrangement
- Bankruptcy - Contrary to one of the biggest misconceptions, houses can be saved going down this route, and it can be the right course of action for some people
You can place yourself in the best position, finding out the right course of action for you, and in doing so give yourself as much time as possible to protect yourself and your assets by first speaking to an experienced insolvency consultant.
