An IVA can be a very useful debt solution if you are running a business. It offers more flexibility than Bankruptcy for business people.
Included in this article:
- Can a Company Director start an IVA?
- Can you use an IVA if you are a Sole Trader?
- Will you be able to maintain your business Bank Account?
Want help to start an IVA? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts
Can I still be a Company Director if I start an IVA?
As a Company Director you retain your position if you start an Individual Voluntary Arrangement (IVA) How will the IVA affect your job? Do you have to inform the Board or your fellow directors? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement-frequently-asked-questions/how-will-an-iva-affect-my-business
Can a Company Director start an IVA?
If you start an IVA legally speaking there is nothing to stop you continuing to act as a company director. You can even take up new directorships while you are in the Arrangement if you wish.
If you are an owner director you will need to be able to prove your company can sustain your required monthly IVA payments. You will be asked for company accounts and a cash flow forecast to support this.
If your company has only been trading for a month or two you will not usually be able to apply for an IVA immediately. You first have to build up at least 6 months of trading history in order to prove your income.
If you are a director of a larger business your contract may state that you need to inform the Board if you become insolvent.
Can a Sole Trader start an IVA?
There is nothing to stop you running a business as a sole trader during an IVA. You will be able to start the Arrangement as long as you can prove your business can sustain the agreed payments.
The way you prove your income is by producing business accounts and your personal tax returns. You will also need to provide a cash flow forecast.
If you have only been trading for a short period you might have to delay your application. This will give you time to provide evidence that your business is trading successfully and supports your income requirements.
If you own money to HMRC it is possible to include this debt in your IVA. As such it can be a particularly good solution for sole traders.
Will you be able to maintain your Business Bank Account?
A limited company bank account should not be affected if you start an IVA. You and the company are separate legal entities. If you have debts that you cannot pay this should not affect the company and vice versa.
However if you are an owner director there could be a problem if your personal and company accounts are held at the same bank.
In these circumstances if you include debt in your IVA that is owed to your personal bank the company account will also be alerted. The result may be that company credit facilities are withdrawn.
If you are a sole trader and owe money to your bank you will probably need to open a new bank account for your business.
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Hi
I have a limited company business bank account with the same bank as I have a personal account. I have entered into an IVA. i owed my personal bank money. Would my business account be affected? I have no credit with the business account. I am just worried that my account would be frozen so I couldn’t pay for things for my business to keep income coming in.
Hi Rob
The ltd company account should be fine. The company is a separate entity and so your IVA in itself cannot trigger the bank to close the business account.
The only time there is a problem is if you do have credit facilities such as an overdraft. Knowing you are in financial difficulty the bank would probably protect itself by withdrawing the ltd company facility. But if you do not have any credit on the account it will be fine.
I already have an IVA and have been full time employed during that time. I have now however decided to resign and have been asked to be managing director of a new company being set up and to set myself up as a LTD company (for tax purposes). I would be a partner in the business. Would my IVA have any effect on this?
Hi Jake
There is nothing to stop you setting up a limited company and being the director of the business while you are in an IVA. The only concern that your IVA company might have is will the change affect your income and therefore ability to pay your IVA?
If your income after tax will remain pretty much the same then there is nothing to worry about. However if it is likely to change then this would have an affect on your IVA payment. I would suggest you discuss this with your IVA company so you understand the full implications before making any firm decisions
Due to low income and other financial circumstances i am thinking about to go for IVA option. I am also a director of the company with 100% sole shareholding . I have also credit card outstanding and loan £20000 outstanding with my bank. Now I am not in a position to pay back the personal debts and also these business debt that I have given the personal guarantee. Please guide me can i include this business debts with director person grantee will be included in my IVA.
Hi Amit
This is quite a complicated situation. Firstly you need to understand whether your limited company can continue trading and paying back its debt and paying you a wage. If it can then an IVA may well be possible. However the Arrangement would ONLY include your personal debt NOT the business debt. This is because an IVA is an individual debt solution. You cannot include a third party’s debt. In your case your limited company is a third party.
In these circumstances you will have to let your IVA provider know that you are a guarantor for the business debt. However given the company can afford to continue paying this there will not be an issue.
There will be a problem if your company cannot afford to continue paying its debts. If this is the case then technically it is insolvent and should not continue to trade. In these circumstances you should stop trading and possibly liquidate the company.
Then if you started an IVA it would include your personal debt and the business debt you have guaranteed. However the issue is then of course how would you pay for the IVA. In these circumstances perhaps a full and final settlement IVA would work for you. Alternatively if you have few assets bankruptcy might be a better way forward.
Given the complexities of this I would advise giving me a call for a chat before you make any decisions (0800 077 6180).