If your business fails, you could be personally liable

18th November 2020

With more than 400 employees, the company seemed established.

But the truth was, it was insolvent.

That was the conclusion reached by my friend Keith Steven. He’s managing director of the KSA Group, which is expert at turning around distressed businesses.

His team had just spent three days at headquarters of this large business, interviewing all the key players.

They formed a series of urgent recommendations to save the company.

But the owner ignored them all, preferring to refinance the business with more debt.

Several months later the owner returned to Keith for help, because his debt to Inland Revenue had become suffocating.

But again, he delayed taking decisive action. He seemed to be in deep denial about the extent of his financial problems. And as the sole director of the company - with no board or finance director - there was no one who could force him to confront reality.

Recently, Keith learned that the company had appointed administrators, and that the business owner had been removed from his own company.

All that would be bad enough…

But here’s the sentence which should strike fear in the heart of any business owner.

“The owner will likely lose his house,” Keith told me sadly a couple of weeks ago.

In other words, he will be held personally liable for his business’s enormous debts.

Many - perhaps most - business owners have no idea this is even possible.

If you run a limited company, you probably believe that your personal finances and your business finances are two completely different entities. If something goes wrong with your business it may become insolvent - but you personally are shielded from the consequences.

The problem is, that’s simply not true.

The law is very clear…

If the company director knew or ought to have known that they had no prospect of avoiding insolvency, they are personally liable for the company’s debts.

Read those words again, because they’re so important.

It means that the onus is on you to be aware of financial issues in your company. Ignorance is no excuse!

And the burden is on you to deal with them, when they occur, in good time.

Unfortunately, many company owners don’t reach out for expert help until they are in deep debt. If you’re at that point, then you’re risking leaving it too late. If insolvency is inevitable and you did nothing about it, you’ll have some personal liability.

And yes, you may very well end up losing your home… your savings… your financial future…

…All because you didn’t take action when you should have done.

It’s hard to bounce back from that.

That’s why, if you have any inkling that your company is in financial trouble, seeking expert advice early on isn’t “just” about saving the business.

It’s about protecting you and your family as well.

So if you’ve been having cashflow issues, have taken on large amounts of debt (including government loans) or have seen any other ‘warning signs’, don’t wait.

Hit ‘reply’ or call 01279 647 447 to get in touch with us today.

We’ll establish your true financial position, to determine how deep the trouble runs.

If necessary, we’ll put in place measures to nip the issues in the bud - or save your business. We’ve helped many businesses come back from the brink, including some whose directors had all but given up - so have hope!

Should the worst happen and we conclude that your business cannot be saved without an expert turnaround advisor, we’ll refer you to Keith.

If you need to go through an insolvency process, he will do his utmost to protect your position and reduce your personal liabilities.

Of course, none of that has to happen - provided you take action early.

So don’t wait.

If your gut tells you that your company is in any kind of financial trouble, let’s have a confidential chat today.

It won’t cost you anything - and may very well end up saving your company and your own finances.

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