• Posted

As we enter another national lockdown the government has announced it will give out grants to businesses in retail, hospitality and leisure to help them keep them afloat. This is in addition to business rates relief and the furlough scheme extension to help protect jobs and keep companies running. Despite this support, the latest restrictions could be the ‘final blow’ for struggling businesses who may be forced to close for good.

In the next instalment of companies in crisis, our Q&A series for company directors, senior litigation lawyer Alexander Neale explains what your responsibilities are if your company has no way of paying back its debts.

Key points

  • If you think that your company cannot pay its debts and will need to enter formal insolvency, as a director you should not allow the company to continue trading.
  • The main concern should be how continued trading may affect the monies available to be distributed to existing creditors.
  • If you allow the company to incur additional creditors when you know the company is insolvent, you can be found guilty of wrongful trading under section 214 the Insolvency Act 1986.
  • A court can order you (and any other company directors) to personally pay the debts incurred during this period.

If you think your company may become insolvent, you should always seek immediate professional advice. Our insolvency experts can talk you through your options.

To watch previous videos from our companies in crisis series, please click on the titles below.


The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.