As a director of a company with cash flow problems you MUST take immediate, knowledgeable and independent advice. A Licensed Insolvency Practitioner, like Gibson Hewitt, will give you 1 hours free professional advice, with no obligation.
You will be advised that as director of the company your need to take considerable care so as not to become personally liable or worse disqualified from acting as a director.
What must I do?
taking credit immediately whilst the situation is being considered. Credit here means ordering goods or services on normal trade credit without making a payment for them. If you need to buy something you must pay cash for it. Failure to do so could result in a wrongful trading action being taken against you personally. This includes using credit cards of any nature, you cannot pay for something using a credit card as you are increasing the amount you owe the credit card.
paying anybody unless you KNOW you can pay everyone. If you think I must pay x because I know them personally/ they are only a small creditor/ I am related to them as a director you are guilty of preference ie preferring one creditor over another. If it can be proved you did it intentionally then it is fraudulent preference and not only would you be personally liable for all credit taken since the company was deemed insolvent you could have a prison sentence and be prevented from acting as a director under the Company Director’s Disqualification Act 1986.
taking monies out of the company by way of dividend. Any overdrawn directors’ loan account is fully repayable. A directors’ loan account (DLA) is any money taken out of the company BEFORE a valid resolution on dividends is passed. A valid resolution cannot be passed if the company made no profits in the period the dividends relate to.
selling any assets of the company unless you can PROVE the price paid is full market value and cash has been received. If a sale has been made to a creditor unless the creditor has paid full market value in cash it is deemed a transaction at an undervalue. Again, as a director you will be personally liable to put the difference between full market value and the cash received.
taking any assets from the company – again directors are personally liable and this is Misfeasance and so it is probably best to STOP TRADING unless you are taking the advice of a Licensed Insolvency Practitioner. As a director you do not want to be guilty or even accused of Fraudulent Trading.
Despite all these problems if you take care and can demonstrate all actions taken were for the benefit al ALL creditors as a director of an insolvent company you have nothing to fear. Contact us now for advice and guidance to keep your business trading legitimately.