It is possible to go bankrupt if you are a company director. However there are implications which need to be considered carefully.
Jump to article contents:
- Can a company director go bankrupt?
- Are the company credit facilities affected?
- What if your Company also has debt?
- Can you run your business as a sole trader?
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Can a Company Director go Bankrupt?
A bankrupt person cannot act as a company director. However if bankruptcy is the best way for you to deal with your debts there are options you can consider.
You can appoint someone else to become the director of the business. You can then resign and are free to apply for bankruptcy.
Your bankruptcy will normally last 12 months. During this time you can work for the company on a PAYE basis. If you wish you can be re-appointed as a director after you are discharged.
The shares you own in the company will need to be bought back from the Official Receiver if they have any value.
Will the Company Credit Facilities be Affected?
If you resign as a director and go bankrupt the company credit facilities should remain unaffected. However if the business is small there can be problems.
If both the company and your personal accounts are with the same bank they will find out you are bankrupt. This is the case even if you do not owe the bank money personally.
They may then become concerned about the viability of the business. As a result they could withdraw credit facilities previously extended to the company such as an overdraft or credit card.
If you are an owner director of a small business your bankruptcy could result in the company credit facilities being withdrawn.
What if your Company is also Struggling with Debt?
Company debt is not written off if you go bankrupt. If you are also struggling with these debts there are additional options to consider.
If you believe that the business is viable you could consider a CVA (Company Voluntary Arrangement). Alternatively you could liquidate and started a new company (although this must not be done without first getting expert advice).
Where you no longer want to continue trading as a limited company you could simply apply for it to be struck off. You would be protected from any personal liability for outstanding debts by your bankruptcy.
If you have personally guaranteed any company debts your liability for these will cease after you go bankrupt.
Struggling with Company Debt? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts
Can you Run your Business as a Sole Trader during Bankruptcy?
There is nothing to stop you running a non limited business as a sole trader while you are bankrupt.
If your company is small rather than trying to keep it running by appointing a new director you could close it. Then you could then carry on your business as a sole trader instead.
It may not be possible to open a new bank account that you can use for your business while you are Bankrupt. However a possible solution to this is open a personal account to use for business transactions.
You will not be able to use any form of credit to help you run your sole trading business once you are bankrupt.
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