In the case of Re BW Estates Ltd the High Court considered the validity of a directors’ out of court appointment in circumstances where there was technically an inquorate directors’ board meeting.

A winding up order can be used by creditors to enforce payment of a debt by a delinquent company. Often as an act of last resort, creditors petition the court to have the business liquidated, usually after several failed attempts to recover their money.

The expense of going through the courts to obtain an order of this type indicates their determination, and this is a method often used by large secured creditors such as HMRC and the banks.

The Association of Business Recovery Professionals suggests that unsecured creditors, on average, receive 1% of the debt due to them from a company that undertakes a pre-pack sale and 3% in cases in which a going concern sale is achieved.  Given such poor prospects, investment of time in identification and reduction of insolvency risk can pay dividends.

There are a number of warning signs of supply chain risk, and it is key that you are familiar with these:

The recent Court of Appeal decision in Horton v Henry has highlighted the protection afforded to a bankrupt holding a private pension to the detriment of his bankruptcy creditors.

Facts

There are certain rules and regulations surrounding company liquidation, many of which focus on your actions as a director. Once a company becomes insolvent, you must put creditor interests first by ceasing to trade and safeguarding its assets, with little or no consideration for shareholders, members or directors.

Accountant in Bankruptcy (Scotland)
The Official appointed to monitor personal insolvency procedures. She will also act as trustee where no insolvency practitioner is nominated on a sequestration petition.

If your company is approaching insolvency, you may be wondering if voluntary liquidation is a possibility. Perhaps if you do not act quickly a secured or unsecured creditor could take the future of the company out of your control, at the same time exposing you and other directors to accusations of wrongful trading?

A Company Voluntary Arrangement (CVA) provides a way for companies in distress to pay off their debts over a fixed period of time, and offers the opportunity to address issues surrounding management and operational systems that were not working.

Pressure from suppliers can be overwhelming when your company is experiencing financial difficulties. Even if it is only a temporary downturn in company fortunes, the fact that a supplier can apply for a winding up order leaves you exposed to compulsory liquidation and closure.

If suppliers have tried unsuccessfully to recover their monies, and your company has failed to respond or been unable to pay, their decision to take legal action could be disastrous.

If you’re a company director then circumstances can arise in which you decide to offer personal guarantees in support of a loan application or your pursuit of a line of credit. Where these guarantees are given, a lender will take some reassurance that they could pursue a director personally for debt repayments in the event of the company becoming insolvent.