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How to minimise the risk in liquidation

By identifying potential personal risk areas, a strategy can be adopted to minimize or reduce areas of risk.

Common risk areas for Directors In A Creditors’ Voluntary Liquidation include:


Re-use of Company Name 

If you’re looking at starting again you need to be aware of the restrictions placed on you by section S.216 of the Insolvency Act 1986. Here at The Timothy James Partnership we can advise you on how to follow the legislation correctly and to stay clear of penalties of getting it wrong.


Directors Conduct Report

A report on the conduct of all directors of a company liquidation is submitted by the liquidator to the relevant government department. Upon receipt, a decision will be made whether to consider disqualification proceedings against the director.


The report is based on the conduct of the directors and how it was run. It also takes into account information provided by creditors and the liquidator’s investigation into the affairs  of the company.



A lease to a company premises may have been personally guaranteed by a director and the director should be aware that a landlord may have a claim for outstanding rent and also dilapidations on the property, which can be substantial.  


Personal Guarantee

Check whether a personal guarantee is in place on company borrowing. This might apply to a loan, an overdraft a factoring agreement and so on. A personal guarantee may mean that in the event of a liquidation of a company the responsibility for paying the guaranteed debt could pass to you.


Director’s Loan Account

A Director’s loan account can often show a position where a director owes money to the company. It’s important that the company’s accounting records are brought up to date to ensure the correct position is shown. If at the date of liquidation the directors loan is overdrawn, then these funds will need to be paid by the director personally, back to the company in liquidation.


 Preference Payments

Avoid making payments which could be challenged by a liquidator as being a preference payment. If challenged successfully, the payment will have to be repaid to the company in liquidation.  


The Timothy James Partnership works to help businesses in financial difficulty and we can advise you on how to deal with situations which may put your business at risk of insolvency.


Added: 26 Jan 2017 12:22

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The Timothy James Partnership

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Insolvency Practitioners Association
About Us

We are an independent firm of specialist Licensed Insolvency Practitioners located in Bromsgrove, Worcestershire.

At The Timothy James Partnership, we work very closely with local businesses and professionals, providing guidance on formal insolvency procedures and advice on restructuring businesses.

We recognise that at times, companies find themselves in difficult financial circumstances and our aim is to provide practical solutions in these situations.