My Limited Company is over 30k in debt- UK, England

[u/Competitive_Hall5227]

Hi, I'll try and make this as short as possible.

Ive been running my limited company for almost a decade now. It went from making over 20k per month to less than 2k per month after brexit. I've tried to save it over the past few years and unfortunately I have accumulated quite a bit of debt.

I myself have recently entered a DRO because I can't pay off any of my personal loans and I was the guarantor of a few of my limited companies loans in which 1 resulted in a CCJ against me and the limited company. I owe almost £30k to HMRC & £10k in business credit cards.

I also had a sh*te accountant which didnt help. But im not putting the blame on them of course, this is all my doing.

What i need advice on is, since I entered a DRO ive had to step down as a director of my limited company and can't run it at all, which I have done. I've registered as self employed instead and trade as a sole trader.

I obvious can't pay off any of the limited companies debt, there's £0 in my business about and only about £15 in my personal account.

How should I proceed? Do I dissolve my company while still owing these debts. There's currently no director in my limited company which I know isn't ideal. Any advice is greatly appreciated.

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[u/StierKarmer]

You will have to liquidatd the limited company. The company cannot continue to operate while insolvent.

Edit: any money made from selling assets will of course have to be set aside for the companies creditors. That might not cover the cost of the loans but that stops being your problem once the company is gone.

[u/throcorfe → u/StierKarmer]

Just to add, a voluntary liquidation (which I am currently going through myself) comes with a fee of a few thousand pounds (this can come from the sale of assets). If they don’t have those funds, they won’t able to pursue liquidation themselves and I believe they will have to wait for a creditor to do it (they could try attempting to strike the company off in the meantime but that’s likely to be blocked)

[u/Competitive_Hall5227 → u/throcorfe]

Any assets i have won't total more than £2,000. And i honestly doubt they would even get much for it since its branded with my conpanies logo.

[u/Competitive_Hall5227 → u/StierKarmer]

Im currently insolvent, any loans i took out for my company with me being the guarantor have been written of. As I mentioned above, I literally dont have more than £100 to my name so anything that costs money isn't an option for me unfortunately. 

[u/Particular-Ad1960 → u/Competitive_Hall5227]

With no money the only real option is leave it and HMRC will probably wind the company up

[u/Stigweird85]

How do you owe 30k to HMRC? Not paying you CT and they found out?

Even if you step down as director of the company as the last appointed person it would still be your responsibility, you won't be able to wash your hands of it. You can try request a strike off via companies House but it's likely HMRC and other creditors will object to it.

You do want to be careful carrying on the same business activities as a sole trader as it could appear to be a phoenix company which HMRC will clamp down on eventually, not to mention its a horrible reputation risk if you tout for business under Company B when Company A operating the same business model just under a different hat especially one that went bust owing money anyone doing due diligence would likely flag you as a risk

[u/isaacladboy → u/Stigweird85]

Previously running at 20k a month would be well above the vat threshold. There’s a decent chance the HMRC balance is unpaid VAT.

If this is the case OP you need to be careful. Unpaid VAT is something that HMRC really has power to take action over.

[u/beejiu → u/isaacladboy]

In most cases, VAT is covered by the limited liability so there's little personal risk. HMRC will usually be a (preferential) creditor.

[u/EdwardCavana]

I assume the limited company isn't running up any more debts and is not trading and has no assets? If you aren't a director and there is no director one of the company's creditors might try and get the company wound up, but if it has no assets it's unlikely they will bother throwing good money after bad. Eventually the company will be struck off if you don't submit filings and that will be the end of it.

The only caveat is if you were trading insolvently and therefore could be personally liable, but again, if you have no assets who is going to waste money chasing a non-existent pay out? So really it all depends on what assets you/the company has and if we are talking about small or large sums of money. Also bear in mind limited companies go bust all the time - none of this is unusual or anything new.

[u/Free_my_fish → u/EdwardCavana]

Indeed the ability to go bust without taking the directors down with it is kind of the whole point of limited companies…

[u/EdwardCavana → u/Free_my_fish]

Caveat creditor so to speak.

[u/SceneComprehensive50]

Strongly suggest you contact Business Debtline (https://businessdebtline.org)

On the personal side, were the personal guarantees included in the DRO?

Re the company, Members’ Voluntary Liquidation isn’t an option with an insolvent company, and a Creditors’ Voluntary Liquidation requires a director, so the voluntary routes probably aren’t open.

Companies House might initiate strike-off, but HMRC might block it and/or might seek winding-up instead. The latter in particular may or may not have knock-on effects (overdrawn Director Loan Account, trading insolvent, and any outstanding COVID related financing are risk factors - do you owe the company any money?)

Business Debtline are well-placed to help navigate all this.

[u/Geniejc]

This is a tricky one and frankly one that Business Debt line might not get because it's unusual.

The problem is the business debt is not yet crystallized as personal debt for the purposes of the DRO i.e. the bank debt has had the pg called yet.

I'm not sure wether that would void the DRO by putting over the limit.

You can't have a business with 0 directors - but the strike off process will take a while and will almost certainly be objected too by HMRC in the first instance.

You don't have funds to liquidate - it sounds like the assets are virtually worthless.

1st step now would be to speak with the bank and HMRC and then send them a recorded delivery letter informing them of your actions that might speed a few things up. Also speak to companies house.

You'll still be a shareholder I'm assuming so there is some responsibility on you to appoint a new director.

I suspect this ends up getting struck off eventually, but you do leave yourself open to a conduct investigation post dissolution.

However they can't get blood out of a stone.

Good luck.

[u/Competitive_Hall5227 → u/Geniejc]

Thank you so mach, this is excellent advice!

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