If a Limited Company is insolvent and you do not cease trading, you may be accused of Wrongful trading. A company can be deemed ‘insolvent’ if it can’t pay its debts as they become due or, its liabilities are greater than its assets.
A Court may make a Director of a company that has gone into insolvent liquidation, personally liable for some or all of the company’s debts if; at some point before the company was wound up, he knew or ought to have known that there was no reasonable prospect that the company would avoid insolvent liquidation and did not take every step to minimise the loss to the company’s creditors.
It is clearly more difficult for a Director to defend against a wrongful trading accusation where a creditor forces the company into liquidation rather that the Director taking the necessary steps to close it down.
If you feel your company may be insolvent, call us for immediate advice.