Risks of Liquidation?

Are there any risks of liquidation?

Directors and shareholders are not liable for the debts of the company, unless they have signed personal guarantees to the bank, suppliers, landlord, finance lease , etc.

To put things in perspective, operating as a sole-trader is the equivalent of being a director of a company and giving a personal guarantee to every party the company ever deals with.

Company’s are disposable by their very nature.

The Limited in Limited Company refers to the fact that the shareholders, directors, and staff of a company are not personally liable for the debts of the company.

Personal guarantees cannot be extinguished by liquidation, they are a personal matter and have to be dealt with outside the Liquidation process.

So the risk of personal financial implications for Directors has to be assessed.

Other than possible liabilities under personal guarantees, the main risk of negative impact to the Directors of a company placed into liquidation is if they are subject to disqualification proceedings by the Insolvency Service, if they consider there has been serious mismanagement of the company, that breached provisions of the Companies Act, Insolvency Act and Company Directors Disqualification Act.