The recent end to wrongful trading suspension means that company directors are once again at personal risk if their company continues to trade when clearly insolvent
When a company becomes insolvent the director's main focus should be to not make the creditor's position any worse. If a director doesn’t do this and losses to creditors increase, then they could be accused of wrongful trading and potentially made personally liable for some or all of company debts and be disqualified from being a director.
Signs of wrongful trading:
•Not paying your bills on time or robbing peter to pay paul
•Not being able to pay HMRC and increasing your liabilities to them
•No money in the bank and constantly being in your overdraft
•Being maxed out with all your suppliers – remember if you knowingly take credit with no hope of ever paying it back this could be classed as fraudulent trading
•Taking deposits from customers with no hope of finishing the job, this could also be classed as fraudulent trading to.
Here are some tips to protect you from accusations of wrongful trading:
•Make sure you have up to date and accurate management accounts, it’s imperative you understand exactly where your business is month on month
•Document everything and make notes on all your decision-making, if there is more than you involved in running the business hold meetings and make minutes. Get everyone to sign the minutes once they are typed up.
•Once your company becomes insolvent or you think is imminent take advice early, the earlier you seek professional advice the more options there will be available.
If you have any questions, please let me know,
All the best
Chris
