If my limited company goes bust, will I lose my house?
No, as the director of a limited company, in most circumstances, if your company becomes insolvent you will not lose your home. A limited company is classed as a separate legal entity to the associated directors and shareholders, protecting you via limited liability.
What is limited liability?
Limited liability means that, as a company director, you are not personally responsible for the company’s debts. Your company is a separate legal entity, so its financial liabilities do not automatically become yours.
Generally, this means directors cannot be held personally liable or responsible for the limited company’s debts.
In what circumstances could I lose my house?
The protection of limited liability means that if your company becomes insolvent, any personal assets such as a house will be protected. But there are some circumstances during a liquidation that could force a director’s hand to sell their property.
- Personal Guarantees (PG)
A personal guarantee is a legal commitment made by you to a third party, such as a lender, supplier, or landlord, that you will honour your company’s debt if it cannot pay it itself. This may include granting security over your personal assets, such as your. If your company defaults on the terms of the borrowing or enters an insolvency procedure, your PG will become enforceable by the third party. If you’re concerned about liability via a PG, in some cases lenders may be open to negotiation.
What happens to personal guarantees in insolvency - Trading whilst insolvent
If your company continues trading despite you knowing that it is insolvent and unable to meet its liabilities and obligations, this could potentially lead to further losses for creditors. In this case, the company is considered to be trading whilst insolvent. If your company enters an insolvency procedure, this loss to creditors can result in personal liability. By seeking advice early, we can help you understand your company’s solvent position and allow you to protect yourself early by ensuring that you are acting in your creditors best interest.
More on trading whilst insolvent - Overdrawn Director’s Loan Account (DLA)
A Directors Loan Account is a record of transactions between you and your company. If you have borrowed money from the company which has not been repaid, and as a result, you have an indebted (overdrawn) DLA when your company enters liquidation, you may be required to repay the outstanding balance using your own personal funds. These funds can be sourced from personal assets such as houses. We will work with you to find the most suitable solution if you have an overdrawn DLA.
More on overdrawn director’s loan accounts in insolvency - Bounce Back Loan (BBL) misuse
You can be held personally liable for misusing a BBL. This can involve obtaining loans through false information, using funds for unauthorised purposes, or engaging in activities that don’t align with the loan’s terms. If you’re unsure about if you have misused a BBL, or have concerns about personal liability, we can provide free advice including how this can be addressed.
More on Bounce Back Loan misuse
How our services can help your company
If you’re worried that your company may be facing financial difficulty and you’re concerned about the prospect of losing your home, we can provide confidential advice on your situation. From here, we can advise you of the available options and what would be best for your personal finances and the company’s.
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
- Restructure your company through administration
Administration is an insolvency procedure for companies. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
- Close your company down via a Creditors Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
How to get in touch with us: The next steps
- Speak with our initial advisers
Contact our team via phone, filling out our form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
With the protection of limited liability, if your company becomes insolvent, in most circumstances, your finances and personal assets, such as a house, will be safe. There are certain situations in which you could be held personally liable for your limited company’s debts and therefore having to use funds released from your house. We can advise you on the best ways to handle these situations with free confidential advice.
Case Studies
Designer Recliners Limited
Kelly Burton • Manufacturing • Administration, Company Voluntary Arrangement (CVA)
A Sheffield furniture manufacturer and upholster has relaunched offering a smaller, more specialised range of products.
Anico Interiors Limited, which included reclining chairs for the elderly, had suffered cash flow problems and issues with profitability.
Designer Recliners Limited, managed by director Nick Wall, has purchased the assets and business of Anico saving all 11 jobs.
Andy Wood and Robert Dymond from Sheffield business turnaround experts Wilson Field were appointed joint liquidators on 8 June and advised on the sale of the 14-year-old company, based on Orgreave Crescent at Orgreave Industrial Estate, as a going concern.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Historically, the company offered a wide range of products but has now streamlined its offer to customers and cut out some unprofitable lines, as well as re-vamped its web site.
“Directors took advice from Wilson Field with the business sold to new company Designer Recliners Limited as a going concern, safeguarding all 11 employees’ jobs. The new company will offer the same service and standards under the same management team but focus on a smaller range of specialised products.”
The company employs skilled staff including upholsterers, seamstresses and cutters and was set up in 2002 by Nick Wall.
Silcox Coach Company
Kelly Burton • Automotive • Company Voluntary Arrangement (CVA)
Pembrokeshire-based Silcox Coach Company, which operates school transport as well as local bus services, has been placed into administration today.
Despite attempts by administrators from Sheffield-based Wilson Field to secure a buyer with various interested parties, the 134-year-old company, which operated a fleet of 65 coaches and buses from its base in Pembroke Dock, has now ceased trading.
Insolvency practitioners Kelly Burton and Joanne Wright from Wilson Field Limited were appointed by shareholders after the company experienced financial difficulties and as a result all 92 staff jobs have been made redundant.
However, in the region of 50 staff have been re-employed by Edwards Coaches of Pontypridd who have been granted the local authority contracts previously operated by Silcox.
Kelly Burton, director and insolvency practitioner at Wilson Field said:
“Silcox Coaches was a fourth generation bus and coach operator and over the years provided various forms of transport services latterly focussing local authority community bus routes, school services, coach hire and coaching holidays.
“The company had an excellent reputation within the industry, the local community and its clients. Initially there were a number of parties interested in buying the business and assets and we had hoped to save all the jobs of the loyal workforce. Sadly, despite our best efforts none of these came to fruition. On the positive side, Edwards Coaches of Pontypridd have re-employed approximately 50 of those staff.”
As well as office accommodation in Pembroke Dock, Silcox also occupied a small travel office in Tenby and a large bus and coach compound near the offices in Pembroke Dock.
Edwards Coaches is the largest family owned coach company in Wales employing over 500 staff and operating 260 vehicles. It currently operates National Express coaches from Haverfordwest departing daily to Cardiff, Heathrow, Gatwick London and various other destinations plus transportation for over 8000 students to school or college each day from bus depots all over South Wales.
It also operates coach holidays for 80,000 passengers a year across the UK and Europe and operates The Edwards’ Red Dragon coach which is the official carrier of the Wales Rugby Team.
Travellers who have booked and pre-paid for a holiday with Silcox may be entitled to a refund and should contact either Bonded Coach Holidays (BCH) e-mail: bch@cpt-uk.org or The Confederation of Passenger Holidays UK (CPT) Tel: 020 7240 3131.
Free Consultation
Request a free confidential telephone consultation from 9am - 8pm, 7 days a week.
