Are you a director of a limited company that has been served a winding up petition? If so, the following information is a must read!
So many directors have come to us over the years in a state of shock because Government has found them personally liable for company debts. They don’t understand why or how this could happen because the underlying purpose of forming a limited company was to mitigate personal liability.
Under normal circumstances this is all well and good, but when a company is trading insolvent, the rules change literally overnight! The law states that directors should stay on top of their company’s finances and at the very first warning that the business has ‘no reasonable prospect’ of paying debts, the company should cease trading.
Should a director fail to stop all trading at the first warning signs of insolvency he/she can (and will) be held personally liable. This means that all or part of any debts incurred during the period of trading insolvent may be assessed personally to the director or directors held responsible. As bills remain unpaid, one or more creditors will most likely petition to have the company wound up.
Now then, when the winding up petition (WUP) is published in the Gazette, banks immediately freeze bank accounts. Bankers know that any trade during this period can be considered null and void which would leave them (the bank) holding the proverbial bag. The bank would need to make good any of these debts the company cannot pay upon liquidation.
A limited company having its bank account frozen will effectively force the business to cease trading. There will be no money to pay suppliers and of course no money to pay workers. Directors of a limited company with a frozen bank account would need to pay, out of their own pocket, any monies needed to maintain a status quo during the period of challenging the petition if they should decide to fight it.
There are ways to ask the court to unfreeze accounts but the process is costly and quite involved. In the meantime, directors must continue paying out of pocket any expenses such as legal fees and court costs. A validation order would be needed to free up money to continue paying creditors, employees and the costs of fighting a winding up petition.
As you can see, there is a huge impact on directors of a limited company once bank accounts are frozen. It costs money to unfreeze those accounts but company money is unavailable. Rather than wait until your accounts are frozen, seek help at the first signs of insolvency.
Whether you are the director of a company whose accounts are already frozen or a director of a company trading insolvent, contact us without delay. The insolvency specialists at Real Business Rescue can offer solutions to help you avoid being would up and liquidated.
As a director, you do not want to personally pay for debts incurred by a limited company. A limited company frozen bank account can be dealt with and we have successfully managed this time and time again. For help, advice and real business rescue solutions call us today on 0800 644 6080.