My company has gone 'bump' but what do i do?!

Mercury_Man_2

I started a company in april 2011 and by end of november I couldnt afford to carry on trading, i couldnt pay invoices so couldnt obtain more goods to try and earn the money to pay the debts.

I was told to write to the companies i owe money to (7 totalling nearly £16,000) and explain the company had cceased trading and was techinically insolvent and there invited winding up orders as we dont have funds or assests to call in a liquidator.

It is a ltd company and I am the sole director, i am in personal debt so although now in employment have no way of paying the debt personally, but do i have to with it being a ltd company?

I am starting to receive legal letters off solicitors and I have no idea what to do or what to reply. Who do i speak to? Can i receive free legal advice from anywhere?

Its starting to make me ill with stressing and worrying, please help!!!!

bengalknights

If its a limited company then the only liabiltys you personally have to pay are those to which you acted as guarantor all others should be with the company itself.

texranger

As a ltd company director i assume when you set this up you took out 1 share of £1. if yoiu have not acted as guarantor for any liabilities then your only personal liability is the share value of £1, but you will need to speak to a solicitor ( most give free initial consultation)

Pennywise

Hang on, it's not just a matter of whether you've signed any personal liabilities. It's also whether you've acted properly/legally as a director. You can become personally liable if you've continued to trade whilst insolvent, and may be liable to repay any dividends or loans you've personally taken out of the company.

So, it all depends what happened to the money to cause the company to become insolvent. Was it a matter of suffering bad debts from customers, or were the company overheads too high, or could you not sell the stock you bought for a price above cost. If the demise was caused by that kind of thing and you shut down the moment you knew you couldn't pay off the debts, then you're probably personally OK.

Has the company any stock left or assets - you can't just take these personally, they belong to the company and must be sold off to repay the company debts.

BUT, if it was because you took out too much money, i.e. paid yourself dividends or loans rather than paid the suppliers, or if you carried out trading and incurring bills when you knew you couldn't pay them, then you could well become personally liable if a liquidator decided to persue you for funds to cover their costs and make a partial payment to your creditors.

You also have to make sure that it was indeed your company (and not you personally) that contracted for the goods and services that havn't been paid for. If you havn't been clear in your ordering, then it's possible that you may have unwittingly bought things in your own name rather than the company's and would indeed be personally liable in that case.

As for the way forward, presumably you can't afford to engage a liquidator, so you have to wait until someone else appoints one. You need to write to all creditors telling them that the company ceased trading and has no funds to pay them. It's possible that no-one will want to pay for liquidation so eventually Co House will strike off the company. It's usually HMRC or any larger creditor who will appoint a liquidator - if you don't owe HMRC any tax and only owe relatively small amounts to lots of creditors, then it's highly unlikely any of them will feel it worth appointing a liquidator. If you continue to receive threatening letters from creditors, then just keep sending them copies of your original letter to them telling them the company has shut down and has no monies - you can't and shouldn't do anything else.

chalkie99

I am surprised you managed to get credit from so many companies.

You would normally need to supply trade references and other details before being allowed an account with most suppliers and, as your business only existed for 6 or 7 months, I struggle to see how you could have done that.

Did you purchase under the ltd. co. name?

CKhalvashi

chalkie99 wrote: »

I am surprised you managed to get credit from so many companies.

You would normally need to supply trade references and other details before being allowed an account with most suppliers and, as your business only existed for 6 or 7 months, I struggle to see how you could have done that.

Did you purchase under the ltd. co. name?

We have around 250 account facilities, however everything was paid in cash even as far back as 2003 (co. 2 years old), as noone would touch it until there were 2 years books?!

As of this moment, I owe about £2.1m and am owed about £2.6m, however it’s taken a £37m t/o to get the facilities I have.

With regard to referencing, the fact that suppliers have allowed this to get to the stage it did is concerning!