If a company gets liquidated, are there NO consequences?

[DistinctlyDisgruntled]

A company has gone into liquidation owing me money (and various other people, according to Conpanies House). The owners have already started a new company which is very similar to the old one and by the looks of Facebook have just got back from a cruise.

Is that it then? They can just keep starting new businesses and ripping people off?

Pretty much

I’m sorry. It’s awful isn’t it?

It’s shit but it happens. They just get their granny to be the new director and carryon.

People can be disqualified from being or becoming directors again for a period, but usually only if action is taken against them or there has been egregious trading whilst insolvent or proven fraud. There are, unfortunately, ways around this and smaller creditors aren’t often in a position to go to law.

It depends on the type of company and status of the owners

For example the directors of a limited company may not be personaly liable (there are various different liabilities depending on specifics), but a sole trader would remain personally liable

Debtors should be notified and may claim against company assets or pursue individuals depending on liablity

There is the matter of weighing up the options as to whether pursuing the debt will achieve anything, but of course if they close down one and open another with no challenge then they get away with it

Proper advice would be required based on the specific circumstances

Yep. It's called "phoenixing" and it happens a lot.

Surely they can’t just go on doing the same indefinitely? Their new company is also already in debt.

It’s unbelievably common. And yes, if the directors aren’t indicted for anything, they can just do it over and over again.

I know a case where he had been doing it for over 15 years. Just set up new companies with the director(s) being the wife, sone, daughter, MIL or whatever after he was banned. To my certain knowledge there were at least 9 companies set up successively.

You could try reporting them to HMRC as I guarantee you they won't have paid everything they owed HMRC before going into liquidation.

That would not help poor Distinctly Disgruntled as HMRC are Preferential Creditors.. So if any funds are available, it would be paid to them before any other creditors.

Wow. I don’t think they’re banned as it’s the same directors for the new company… what would mean they get banned? It seems like nothing at all has happened here except abandoning the debt and slightly changing the name.

It's often progressive. Companies go under. That is simply a fact.That doesn't mean directors have necessarily done anything wrong - after all, company status is designed to limit liability, and who would ever risk themselves if there wasn't something like this. Failing doesn't mean the person is a bad person or shouldn't be allowed to try again. That's fair enough in some senses. The "demarcation line" is that liability is only limited if the directors have done "nothing wrong" and "nothing wrong" is a bloody easy hurdle. Fail often enough, or get caught deliberately doing something like trading negligently (not easy to prove) and you might get banned. But you could still run another company - you just might not be able to have your name over the door, so to speak. Google "phoenixing".

As a practicing Liquidator I can confirm that there are indeed consequences for the Directors. All liquidators send a report to the Insolvency Service on the conduct of all persons who have acted as a Director of the company in the three years prior to the insolvency. The Insolvency Service will review these returns and ask further questions if there is culpable behaviour. This can result in disqualification from acting as a company director for a set period. However, not all Directors will be investigated - there are funding limits etc- and the Service can only deal with the most culpable. As Practitioners we also review transactions entered into prior to the liquidation and consider whether there are any actions we can take in relation to the conduct we see. Sadly not all cases result in prosecution or further actions and commercial decisions have to be made as to the likely benefits of taking action.

However, as a creditor you can take steps to bring conduct to our attention- as creditors you have more immediate knowledge as to what has gone on, so please bring your concerns to the attention of the liquidators as soon as you can. It is an offence to set up new companies with similar names etc post liquidation - and the Insolvency Service will review a Directors record for unlawful re- use of a Company name under the anti Phoenixing provisions. And they do prosecute.

so whilst I can understand the frustrations of creditors seeing directors ‘get away with it’, we can take steps against Directors if we think it will result in a return to creditors. Liquidators have many powers and any good liquidator wants to take action against delinquent directors but we do need to find commercial cases that we can bring and which will bring benefits to the creditors. If you want to PM me with individual issues then I’m always happy to have a Quick Look and see what might be possible.

You might find this relevant and enlightening...and only 9 minutes.

https://www.bbc.co.uk/programmes/p058qrk3

Pretty much @DistinctlyDisgruntled.

The Producers is a musical documentary.

Gosh. So if there’s absolutely no consequences for not paying back business loans or HMRC or creditors, I guess there’s nothing to lose? Everyone might as well set up businesses, work 16hrs, pay themselves minimally (keeping the cash under the table as I am virtually certain these people do), and go on four holidays a year whilst claiming universal credit and ripping people off?

Not calling for debtors’ prisons or anything, but I’d have thought having a company liquidated owing money would mean disqualification for a while.

It makes me quite angry. I know I should probably just block them and move on but what a huge piss take.

I think there isn’t. Some companies do this regularly, especially bad ones providing poor quality services.

Everyone might as well set up businesses, work 16hrs, pay themselves minimally (keeping the cash under the table as I am virtually certain these people do), and go on four holidays a year whilst claiming universal credit and ripping people off?

Most of us couldn't live with ourselves but yes, this is perfectly possible.

I wouldn't say there are no consequences.

Closing down your business and starting up a new one can involve a lot of effort. You will have to get a new bank account, which may not be so easy if your last business went into liquidation. You will also have to reorganise all the company addresses, stationary, incorporate a new business, sort out digital systems and tax services, probably get a new accountant, pulbic liability insurance, trading address. You will also have to open accounts with new suppliers and go through their credit checks. Assets if the company has them will have to be taken into account, so if the company has a lot of equipment for example. This is probably a non exhaustive list of things that need to be done.

As a director I believe you are limited in your liability, but I believe there are some things people can come after you personally for. For example I believe insolvent trading - not quite sure what the exact definition of this is but I think it is when you continue to trade when you know the company is insolvent/going into liquidation.