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Can I Be a Director of a Company After Liquidation?

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As a director of a liquidating company, there will be some restrictions regarding your role and what you can do with the company once it goes into insolvent liquidation.

Directors of these companies will be investigated to see how this person acts when their company is facing insolvency and liquidation, with records being assessed from up to three years previously.

Under the Company Director Disqualification Act (CDDA), any director of the company that has performed misconduct during the insolvency period could be disqualified from the office of director for up to 15 years, preventing them from starting a new company.

Such a person will need help from an insolvency service, and our company carries a range of services to help.

Starting again after your business folds

Under Section 216 of the Insolvency Act 1986, directors cannot use the same name as the company that has been liquidated for a new venture.

This section applies that the liquidating company is now a prohibited name for any similar business, and directors can be held liable.

However, you may be able to use a similar name to the liquidating company if:

We can help you get back on your feet the following liquidation and may even be able to support the development of a new limited company. Contact us today to see how we can help.

Re-using Company Names

Such a person may be banned for five years from forming, managing, or even promoting any business with the same or similar company name as the liquidated business.

The exact section applies to the company’s registered name and any trading names that may apply.

There are some exceptions to this rule, such as:

What happens to a director of a company in liquidation?

When a company has gone into insolvent liquidation, the director will be investigated to determine whether or not they are liable for this downfall.

During this investigation, done by court application, all management behaviour in the company will be assessed.

These investigations are compulsory under the Insolvency Act 1986. As the company goes into liquidation, directors will be investigated to determine whether they influenced the company’s situation and if they should pay for it.

What does liquidation mean for a director?

Being a director or even a shadow director under such circumstances can be stressful.

Once your company is liquidated, you will lose all your decision-making powers as director, which will be handed over to the court-appointed Official Receiver (OR) according to the Insolvency Act.

The OR will take over companies that have gone into the liquidation process.

As a company director, you need to cooperate with the OR and provide all the necessary information they need during such circumstances to facilitate the liquidation process.

The official receiver will assess how this person acts before the winding-up order, as outlined in the court application.

Can you still be a director after liquidation?

If your company goes into liquidation, you can continue acting as a director or shadow director if there has been no case of misfeasance.

This section applies if you do not use the same name the liquidated business carried.

Choosing to re-use this name can lead to criminal action and may make you liable for the debts of the new company if that also goes into insolvent liquidation.

Suppose you were the director of a business that has gone into insolvent liquidation or Creditors Voluntary Liquidation.

In that case, you can be banned for five years from the appointed day from forming, managing, or promoting a new business if you re-use the same or similar name of the previous company.

The name this company carries is now considered a prohibited name.

Can a director be personally liable for a company debt?

The court will suggest an association with the following activities to determine if directors have to pay:

Can a director of a liquidated company be sued?

As many companies go under the following liquidation, this is a common concern for directors.

A general rule argues that directors cannot be personally pursued for company debts if there is no money left to pay them. Directors may face other liabilities for the company’s debts.

For example, if creditors hold the directors personally responsible, directors may have to handle the loss. Creditors are usually organised in terms of priority by the official receiver, determining when they will be repaid, and this can cause some issues for directors.

Creditors will be considered either secured or unsecured, which will determine when they will be repaid. Directors cannot move on to any other company when there are still debts to be handled, and failure to put stakeholders’ interests first could put you at risk of bankruptcy.

Working with an insolvency service like ours can prevent additional financial issues as we determine the best order or priorities for your needs.

Buying the assets of your old company

A fair price must be offered for all assets, which will be obtained through an independent evaluation.

The official receiver can help determine this fair price,

HMRC security deposit

A new company may also have to deal with additional safeguards from HMRC following liquidation.

Even if they do not use the prohibited name of the old company or one that will suggest an association with the liquidated company, there will still be some connection between the two which leads to additional payments being required by HMRC.

HMRC will demand a security deposit when you set up any other company, even without the prohibited name.

This is because you are perceived as having additional risk and other liabilities to creditors as a company director of a liquidated brand, even with this new company.

Get In Touch

There is a lot to consider when walking away from a liquidated company, and we offer free advice to all directors.

Contact us today to get an appointed day for a callback, and let us help you move on.

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