When a company faces insolvency, it can feel like the end of the road for its directors. But not everything you hear is true. Here are six common misconceptions about director insolvency.
You Can Never Be a Director Again
Many people believe that once your company goes insolvent, you’re automatically banned from ever being a director again, but this simply isn’t true. As long as you haven’t broken any laws or acted dishonestly, you can become a director of another company, even right away.
2. You Are Automatically Liable
Another common fear is that directors are personally responsible for the debts of a failed business, but this isn’t usually the case. Unless you’ve signed personal guarantees, acted irresponsibly, or broken the law, you shouldn’t have to cover the company’s losses with your own money.
If you’re unsure about the legal use of a company name post-insolvency, a London law firm can explain the rules and help you stay compliant. Forsters are a London law firm that would be able to provide guidance on this restructuring.
3. The Insolvency Will Show Up on Your Personal Credit Report
Company insolvency is recorded against the business, not the individual. Unless you have personally guaranteed any loans or debts, your own credit score should remain unaffected by your company’s financial troubles.
4. You Can’t Use a Similar Name
It’s often said that you can’t use a similar name or trading style after your company closes. You can use a similar name, as long as you follow specific legal guidelines and get the proper permissions from the insolvency practitioner.
5. You Can’t Rehire Staff You Let Go
Another misunderstanding is that once you make staff redundant, you can’t hire them again. As long as the redundancy was handled correctly, there’s nothing stopping you from offering jobs to former employees in a new company or for a different role.
6. Your Suppliers Will Leave You
Some suppliers may be open to continuing the relationship, especially if you’re honest and show that you have a plan moving forward.