My-insolvent-business-has-ceased-trading

Can creditors continue to ask for payment when you stop trading?

When a business faces insolvency and struggles to meet its financial obligations, it’s not unusual for creditors to suspect some form of misconduct by the directors. Understandably, people seek someone to hold responsible, and directors often find themselves bearing the blame.

Business conditions can shift rapidly, though, and even a couple of ‘slow’ months can lead to significant financial challenges. Perhaps the business is grappling with issues stemming from the commercial environment or industry rather than negligence or misconduct on the owners’ part. Regrettably, this situation may result in business owners facing harassment from creditors.

 

When creditors are harassing you

Handling situations as a business owner or director who genuinely attempted to navigate their company through challenges can be tough. If you find yourself facing harassment from one or more creditors, it might be time to involve the police.

Keeping a record of instances where you’ve felt threatened or harassed by a creditor is crucial; it will strengthen your complaint if you decide to make one. Whether it’s persistent threatening phone calls, letters, or visits to your home, such harassment needs to be halted. Reporting the incidents to the police may serve as a deterrent to creditors, demonstrating your seriousness about taking action if required.

 

When misfeasance has occurred

When a business faces insolvency, the owners are obligated to stop trading and prioritise the interests of their creditors. This ensures creditors don’t incur unnecessary losses and helps business owners steer clear of accusations of wrongdoing or misfeasance.

In simple terms, misfeasance involves the mishandling of company funds or property assets. Examples include making preferential payments, selling assets below their true value, and drawing an excessively high salary that contributes to the business’s downfall.

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What are the ramifications of misfeasance and fraud? 

If a creditor lodges a misfeasance claim against you, it could lead to personal responsibility for some or all of the business debts. Disqualification as a company director is also a potential outcome, and this period could extend up to 15 years. In instances where fraud is established, criminal prosecution may be initiated.

In their bid to substantiate the claim, the creditor might take legal action against you, seeking repayment of the debt through the courts. This puts your personal assets and funds in jeopardy if you are unable to afford the payment and need to declare bankruptcy.

At Vanguard Insolvency, our team led by partners can provide assistance and guidance if your business has stopped trading, and you are experiencing harassment from creditors. We provide free same-day consultations and have a widespread network of offices across the UK, ensuring you are never too far from professional support.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.