When consulting with a director about company matters, it is quite common for words such as “me” and “my business” to be used because a director often thinks/acts as if the entity is him and often requires to be reminded that a company is a separate legal entity.  Of course, being a separate entity is often good news because it means that, generally speaking, directors, shareholders and employees are not liable for a company’s debts and other obligations, although there are instances where that can change.

R3, the UK insolvency trade body (www.R3.org), issued guidance notes earlier this year about being a director and the personal liability that can arise therefrom.  With due regard to the provisions of the Companies Act 2006, the R3 notes refer to seven statutory duties :

1. Act within powers : a director must act within the powers assigned in accordance with the company’s articles of association, and only exercise these powers for their proper purpose. We are already seeing how this can be abused with regard to bounce-back loans, because the Director Disqualification Unit is already pursuing a number of individuals who acted as a director and borrowed money under the Covid-19 scheme, subsequently withdrawing the cash for personal purposes.

2. Promote the success of the company : as one might imagine, a director must act in good faith and in a way that is most likely to promote the success of the company for the benefit of all stakeholder groups. This means that a director should have due regard to the interests of creditors when he knows that a company is, or is likely to become, insolvent. Thus, if a director thinks that the company is in financial difficulty and unlikely to recover such that all creditors will be paid, there is a duty to act sensibly rather than borrow recklessly and take inappropriate risks.  Every business, no matter its size, should have a financial forecast for the next twelve months (at least) and be satisfied that there is an underlying business that either is, or can be, successful and solvent.

3. Exercise independent judgement : whilst a director may delegate certain tasks to others with specialist expertise, every director must exercise his own independent judgement in deciding what to delegate and whether to follow the advice of whoever provides it. One cannot let a company sink and try to point the finger at external advisors.  The buck stops at the director’s desk.

4. Exercise reasonable care, skill and diligence : the director owes a duty of skill and care to the company and thus, someone who has experience in a certain industry is more likely to be a director of a company in the same sector rather than something completely different. The Companies Act 2006 provides that a director must exercise general knowledge, skill and experience that one might reasonably expect of a person performing the functions carried out. Simply “hoping for the best” is not good enough.

5. Avoid conflicts of interest : a director must avoid situations where there is a direct or indirect interest of his that conflicts with the interests of the company. For example, if a company is experiencing financial difficulty, a director might be tempted to sell assets to either himself or a related party at undervalue in order to retain ownership once the company fails, or perhaps denude the company’s bank account by settling his loan account to the detriment of third party creditors.

6. Not accept benefit from third parties : a director must not accept any benefit such as a bribe from a third party. Even if a director contends that he is achieving statutory duty 2 above, his conduct and adherence to legislation such as the Bribery Act 2010 must be respected and recorded.

7. Declare interests in proposed transactions : a director must declare any direct interest in a proposed transaction with other directors. This can be difficult if there is only one director but does not absolve someone from knowing the law and acting correctly.

Of course, a director will have to consider the provisions of the Insolvency Act 1986 in terms of the possibility of being guilty of either wrongful trading or fraudulent trading, which may impose personal liability on the director once a liquidator has been appointed.  Further, a director will need to be careful about any third party obligation such as a bank or supplier, in whose favour such director has signed a personal guarantee.  It is not unusual for a director to favour payment of those for whom he has signed a personal guarantee e.g. the bank, which, of course, can contravene the statutory duties detailed above.

The Finance Act 2020 can make a director personally liable for tax debts and of course, he can be pursued for unpaid taxes when the liability might arise from being involved in an activity that purposely seeks to avoid tax, or is deemed to be tax evasion.

Should liquidation incept, the implications of the Company Directors Disqualification Act 1986 also require to be borne in mind in terms of how a director acted prior to liquidation e.g. filing accounts and other statutory returns, leaving one creditor largely unpaid (typically HMRC), taking deposits without being able to provide the goods/services ordered, abusing a bounce-back loan, extracting a substantial salary that was disproportionate to the duties undertaken, drawing dividends in excess of retained profits, not keeping proper records etc.

When a company is entering choppy waters, it is important to be aware of the implications of one’s actions, documenting the situation in suitable form e.g. board minute, and be able to demonstrate that the highest level of honesty, integrity and probity have been brought to bear at all relevant times.

Clearly, any director who thinks that there may be trouble ahead should seek experienced advice at the earliest opportunity because failure to do so could result in more that just the loss of the company.

The views in this article are those of Michael J M Reid, Licensed Insolvency Practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.

July 2022

At the end of last month the Committee of Advertising Practice “CAP”, the organisation that writes the advertising rules which are enforced by the Advertising Standards Authority issued an Enforcement Notice “EN” regarding debt management adverts placed by insolvency practitioners and companies who generate leads which are passed to insolvency practitioners.

In Scotland, the EN relates to the promotion of a protected trust deed, a mechanism for individuals to regularise their financial affairs, relieve stress, learn a lesson in financial management, and eliminate a proportion of their debts.  In fairness, many protected trust deeds include assets e.g. a house or investments, which are sold, but for those who live in rented accommodation and have little in the way of realisable assets, a protected trust deed can offer a release from creditor pressure.

Typically, a trust deed includes a provision that the individual will pay a contribution, assessed as being income less essential expenditure (on a weekly/monthly basis) for a period of four years. Creditors are invited to agree the terms which, if approved, convert the trust deed into a  protected trust deed. As long as the person who signed the trust deed maintains the payment profile established at the outset, debts are frozen and whatever the trustee recovers is used to pay a dividend to creditors.

Over the last few years, concern has been expressed that adverts have been somewhat misleading in terms of offering consumers a method of writing-off virtually all of one’s debts using a Government-approved scheme : the inference being that it is an easy process that makes all debts disappear.  The old adage that “ if it is too good to be true, it probably isn’t “ is particularly apt but equally, the CAP understands that when a person is under severe anxiety and pressure, clear thought/action is not easy.

It is relevant to note that the type of advert being monitored by the CAP is not one placed by Financial Conduct Authority “FCA” authorised debt advisors e.g. Meston Reid & Co, because the FCA has its own strict rules regarding advertising. Indeed, the FCA wrote to over 3,500 regulated firms recently in order to remind them of the standards to observe such that all those who find themselves in financial difficulty  are treated fairly and correctly.

The EN is effective from 25 July 2022 and means that the CAP will start to monitor advertisers, with the threat of misleading advertisements being referred to either the advertiser’s recognised professional body or the local trading standards office.

It is important to remember that the EN does not deal with adverts by those who promote bankruptcy advice services or other forms of debt advice/management, but are targeted towards those who CAP considers vulnerable customers who may find themselves drawn into a situation which does not achieve the desired outcome.  The EN is fairly all-encompassing and includes adverts in traditional and digital forms, including social media, websites and influencer marketing.

It is now the case that an advert seeking to capture the attention of those in financial difficulty cannot reflect affiliation with, or approval by, a debt charity nor that eligibility is guaranteed in terms of being able to write-off debts.  For example, there are restrictions on a person’s suitability for a protected trust deed and, as noted above, it is by no means guaranteed that creditors will accept a proposal.  Using a lead company generator is frowned upon because, whilst such entity may say that the initial service is “free”, the reality is that the lead generator will transfer a group of clients to an insolvency practitioner upon payment of a fee or act in a capacity which generates a fee such as preparing basic financial documentation.

The Code of Ethics applicable to insolvency practice in Scotland for those regulated by the Institute of Chartered Accountants of Scotland, as well as the related legislative framework surrounding insolvency work, prohibits an insolvency practitioner from paying for introductions. Such Code provides additional protection to the public because it makes an insolvency practitioner responsible for their own advertisements and business promotion, and also makes them liable for any third party advertisement which results in an insolvency appointment arising therefrom.

The EN provides numerous examples of misleading terms such as “ free service “, “60 second eligibility check “, “get rid of 85% of your debts”, “ we’ll take care of everything “ and frowns upon a  quick quiz type of format to determine how easy it is to access debt write-off.

The CAP interest in debt/insolvency advertising is consistent with the view that there is likely to be an increase in personal financial difficulties across the UK as challenges emerge for many people dealing with rising prices with consequent stress upon living costs.  The CAP stance is to be welcomed because  the Meston Reid & Co insolvency team regularly encounter individuals under financial pressure who are stressed and not sure how to react.  Insensitive and inappropriate advertising does little to lower the level of anxiety, whereas a confidential chat with someone who can provide independent advice in a measured manner allows any financially challenged individual to make the correct choice that is most suitable for them.

The views in this article are those of Michael J M Reid, Licensed Insolvency Practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.

May 2022

Other than writing about the current Russian incursion into Ukraine, current media attention tends to be focused upon terms such as “ rising inflation”, “cost of living crisis”, “eat or heat”, “interest rate rises”, and “fuel poverty”. It may not take many more months until we start reading about “ bankruptcy” and “house repossession”.

After all, if personal debts become as unmanageable as the stress created by the inability to pay them, the bankruptcy option often provides a release from creditor pressure and an opportunity to reorganise one’s financial circumstances such that a more balanced position can be established.

Whilst bankruptcy will eliminate virtually all personal debts……good news…..what about the ability to keep the house?

If the house is rented then, as long as rent continues to be paid at the agreed amount, the accommodation position will not change.

However, if the house is owned, the provisions of the Bankruptcy (Scotland) Act 2016 “ the Act” mean that all assets, including a house, transfer to the trustee when bankruptcy occurs.

Whether or not the bankrupt remains in the house is subject to numerous factors, which will vary depending upon individual circumstances.  For example, if the house has negative equity e.g. worth £300,000 but has a mortgage of £340,000, the trustee is unlikely to be interested in the house and indeed, may abandon his interest at an early stage.  The State official dealing with sequestrations, the accountant in bankruptcy “aib”, permits abandonment when the view is taken that the negative equity position is unlikely to reverse in the next few years.

Another option is for the trustee to accept an agreed sum ( £500 is the current aib figure ) from the bankrupt of in exchange for removing his interest in the house where it can be shown that minimal net equity exists.

Another matter to consider is the secured creditor’s attitude because, even if the trustee does not wish to pursue the house, the secured creditor may seek to repossess if the mortgage is not serviced on a regular basis. In general terms, a secured creditor does not relish the thought of repossessing and selling a house and would prefer to leave the bankrupt in occupation if possible. A further complication can arise if there is a Restraint Order over the house as a result of the Proceeds of Crime Act 2002  but, thankfully that happens rarely.

As readers might expect, the family home is treated differently to the house that a bankrupt might own and rent to a third party.  Thus, if a house is not deemed to be the family home, the trustee will view it as an asset and, subject to the likelihood of a reversion to the estate upon sale, take steps to sell it.

That is not the case with the family home where, as one might anticipate, the Act has comment to make.  For example, section 113 provides that before a trustee can sell or dispose of the bankrupt’s family home, he must obtain formal consent from those who live in the house : typically the husband/wife who has not been made bankrupt. Where such consent is not provided voluntarily, the trustee must seek authority from the sheriff court.  Such an order, if granted, means that the trustee can evict the bankrupt and his family, secure vacant possession and place the property on the open market for sale.

The position is not made any easier if, for example, title is in the sole name of the bankrupt. The Act provides an element of protection for all those living in the house and if the trustee is seeking court authority to evict, section 113 requires the sheriff to have due regard to :

The needs and financial resources of the bankrupt’s spouse, or former spouse.

1. The needs and financial resources of the debtor’s civil partner, or former civil partner.
2. The needs and financial resources of any child of the family.
3. The interests of the creditors generally.
4. The length of the period during which the house was used as a family home by any of the persons referred to above.

Even if the sheriff is minded to grant an Order in the trustee’s favour, the Act gives the sheriff latitude to delay the issuing of such Order for a period of up to three years.  For example, if a child is about to sit important school exams next year, the sheriff may decide that it is vital to have stability within the family home until the exam diet has been held.

It is fairly common practice for the trustee to negotiate with the bankrupt about establishing the net equity position and how best to deal with it. In reality, not many people wish to go to court and speculate upon the risk of the sheriff granting an Order for/against the bankrupt.  There are many cases where the net equity position is agreed, and in this regard the guidelines from the accountant in bankruptcy suggest that such negotiations should take place at the commencement of a bankruptcy in order to try and introduce an early element of certainty for the bankrupt and his family.

Discussion will then ensue regarding how best to fund the bankrupt’s share of the net equity interest.  Sometimes a bankrupt is able to increase the mortgage in order to release the sum required.  Frequently, the spouse will provide the cash required, and it is not unusual for either a friend or family member to provide the necessary sum of money : normally on the basis that the bankrupt will seek to repay the lender at some point in the future.

It is fair to say that every bankrupt who owns a house does not lose the house. The majority of trustees will try to reach a settlement position because, after all, the trustee’s focus is merely to recover fair value from the house such that a dividend can be paid to creditors.

The best course of action when bankruptcy occurs is to seek advice from an experienced professional. Although the whole issue can become somewhat stressful and often takes a year or so to resolve, it is by no means certain that a bankrupt will always lose the house.

The views in this article are those of Michael J M Reid, licensed insolvency practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.

April 2022

Much has been reported in the media over the last few months about a company obtaining a bounce-back loan and the director(s) not using it for the intended purpose of preserving the economic entity.  For example, there have been reports of a director negotiating a bounce-back loan and, being well aware that there is no personal guarantee should it fail to be repaid, withdrawing the monies and using them for personal purposes.  Doubtless there will be further comment as more misappropriations of government money are uncovered but this article seeks to focus upon the more traditional loan arrangement i.e. involving a director’s personal position and what can happen when formal insolvency incepts.

Many companies, perhaps at the outset of trading activities or when there is a cash flow challenge, obtain money from a director in order to finance the business.  This is perfectly normal.  The annual balance sheet reflects the director as a creditor and, if appropriate, will disclose whether interest is paid on the loan, security provided etc.  However, a difficulty can arise when a company finds itself in financial distress and formal insolvency appears inevitable.  A huge temptation is created when a director thinks that he will lose his/her own money if the company is liquidated and there is some cash (or readily realisable assets) within the company.  The conflict of interest is that the director should be acting in the interests of all stakeholder groups rather than simply his/her own, and not repay the loan to the detriment of other creditors.

If liquidation follows shortly after the loan has been repaid, the liquidator has legal authority to pursue the director under the unfair preference rules for recovery of the money.  Further, there are reported cases of directors being banned from acting as a director of a limited liability company because of a loan repayment preference.

Whilst it is easy to say that the responsible director should accept that he/she is a creditor like everyone else and be part of the unsecured creditor dividend programme, the reality is that a director tends to repay the loan and wait to see what happens.  An understandable course of action ……………. but the wrong one to take.

On occasion, a director has obtained security for the loan in which case further investigation is required about how the security was provided, who authorised it, when it was created, etc.  This can give a director a higher ranking in terms of a dividend payment and in all such cases, careful review is required lest a preference has been created that requires to be challenged by the liquidator.

A common scenario in a liquidation is an overdrawn director’s loan account i.e. the director has taken cash from the company, planning to repay it at some point in the future, but never quite doing so.  Such a situation can arise quite easily.  For example, a company may make a sale in month one of an accounting period, and every month thereafter, generating a profit (ignoring costs) on each transaction.  Strictly speaking, 19% of the profit should be ring-fenced because corporation tax is payable to HMRC nine months after the end of the accounting period.  However, on the basis that profit is earned in month one and the corporation tax thereof is not payable until month 21, it is easy to understand why a director might withdraw monies that include cash earmarked for corporation tax payment, planning to repay the cash at a later date.  Experience shows that when a director follows this path, one can become accustomed to a lifestyle beyond the receipt of a regular mix of salary and dividend, and find it difficult to repay the cash.  If this carries on for a few years and HMRC are not particularly diligent at pursuing the company, the loan can quickly become unmanageable.

When the liquidator arrives and asks the director to repay the overdrawn loan in order to create dividend prospects for creditors, some awkward discussions can ensue, particularly when a director advises that he has withdrawn a substantial sum and has not told his wife about living beyond their means.  Imagine the scene when the diamond and Gucci-clad wife realises that her lifestyle will have to change (and not for the better) with the consequent requirement for some of the family assets to be sold in order to settle the loan account.

Typically, the liquidator will try to be as reasonable as possible once the loan account has been calculated and, for example, allow the director an opportunity to view the loan account calculation before agreeing the balance.  It would not be the first time that a director blames the reporting accountant for allowing the loan account to remain so large for a long period of time, but such complaint is quickly stifled when it is pointed out that the director is responsible for the company records and has signed the annual accounts which reflect the overdrawn loan.

At its worst, the liquidator may have to bankrupt the director for recovery of the loan but this is always seen as a last resort.  Payment by instalments is encouraged if a lump sum repayment is not practical.  In order to assess the position, a liquidator will ask the individual to provide an income/expenditure statement and an asset/liability analysis in order to agree a repayment profile.  All very worrying for the director and not what he/she wants to address after the company has folded and the income stream ceased. At the end of March, HMRC took the step of helping directors by issuing a Director’s Loan Account Factsheet ( www.gov.uk/government/publications/fact-sheet-directors-loan-accounts ) which reflects the points raised in this article.

In conclusion, whether a director has an overdrawn loan account, or is a creditor of the company, when financial challenges present themselves that may result in liquidation, great care must be taken and specialist advice sought. Don’t be scared to ask.

The views in this article are those of Michael J M Reid, licensed insolvency practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.

March 2022

It is often said that “desperate times lead to desperate measures” and in times of financial hardship, there always seem to be plenty people who will take advantage of a situation to the detriment of others. One often reads about theft of money through fraud or other means, and given the financial challenges that we see all around us at the moment, it would not be surprising to think that more businesses will suffer loss through no direct fault of their own.

One common definition of theft is taking something without consent of the owner with the intent of depriving such owner of that property permanently, whilst fraud might be described as either wrongful or criminal deception which is intended to provide financial gain to the fraudster.

Many readers are familiar with reports of those who have lost money through so-called pyramid schemes e.g. Ponzi scheme, an overseas contact offering a substantial sum of money arising from a newly-identified inheritance, companies selling a product that is knowingly unfit for purpose and profiting from other people’s ignorance, or “boiler-room scams” where unscrupulous salesmen would sell fictitious investments for what appeared to be amazing financial returns. These still happen but tend to be dwarfed by the gains to be made by more modern cyber-orientated fraud.

Howsoever perpetrated, any type of fraud sucks cash from a business in an unintended way. Based upon the traditional view that cash is the lifeblood of any business, financial failure is often the result of a company that has been defrauded because of the cash loss sustained.

Of course, fraud can occur internally when, for example, someone with access to the bank account seeks to embezzle monies to fund a personal lifestyle choice.  One of the problems with embezzlement is that, for the thief, it tends to be relatively short term and the person has to become ever more creative in attempts to cover the theft.  Former employees are often able to extract cash from a company e.g.  where a former employee is perhaps aggrieved at the way in which employment terminated and their password and other security measures were not cancelled when they left.

Some examples of bounce-back loan fraud have already been reported in the media e.g. directors claiming cash through the Covid-19 scheme and then withdrawing the money to use for personal purposes. For some companies, this has been hard to spot because the person responsible for the bounce-back claim has been the beneficiary of the loan proceeds. Howsoever it occurs, it is stealing from the taxpayer. Last month, The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill came into force which means that a director who claims a bounce-back loan and uses it for improper purposes, may find himself on the wrong side of an Insolvency Service investigation even after the company has been dissolved : no escape !  Diverting money from the primary business purpose may well lead to financial collapse and the liquidator reporting a director’s conduct to the director disqualification unit.

A professional firm might experience a financial challenge when those involved with the finance function seek to borrow from client accounts e.g. to fund a gambling or drug habit, leaving the other partners to reimburse the client account from their own resources in order to avoid financial collapse of the firm and/or a forensic visit from their governing body. In some cases, a fraud is identified before it causes financial distress, but the reputational issues can be such that there is a long term loss of clients and fee income.

Cyber crime can affect anyone. We now read regularly of a large ransom being demanded by a cyber-criminal who has encrypted the target company’s computer system and won’t allow access to the data without payment. One risk in refusing to pay is the destruction of the computer system and loss of data, whilst another is the concern that confidential information could be circulated publicly e.g. over the internet. Even trying to pay a ransom may cripple a company and result in an insolvency event.

Consider a professional firm being held to cyber-ransom. Imagine the disastrous scenario of a law firm’s clients being published on the internet together with all of their personal details, or an accountant’s client bank being made available on the internet which shows each person’s income disclosed to HMRC.  A negligence claim alone could signal the demise of such professional practice and thus, if possible, a ransom is paid in order to steady the ship.  When cash flow is throttled, even the most healthy of businesses can become subject to a formal insolvency process :  hard to accept if one has been running a business successfully for many years and finds that fraud is the cause of closure.

Every business should have the most robust defences available against both internal and external fraud, but when that proves insufficient protection and financial failure occurs, the insolvency practitioner will work with the company, police and other relevant authorities in order to try and recover the money. However, by that time the damage has been done and the business will have closed.

It is never too early to review internal procedures and IT protocols.  If you don’t and leave a window of opportunity either the casual thief or the sophisticated fraudster will find a way to cause you financial distress………and perhaps even business collapse.

The views in this article are those of Michael J M Reid, licensed insolvency practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.

February 2022

As we canter towards the end of the second month of 2022, the Meston Reid & Co insolvency team has already assisted a number of companies to enter an insolvent liquidation process, with many directors citing the ongoing effects and challenges of Covid-19.  Several other entities have ceased trading but cannot fund an insolvency process e.g. liquidation, receivership or administration, because, for a Scottish registered company, this can only only happen if there are sufficient assets to pay for the cost of it.

Even if the Christmas trading period was reasonably buoyant, directors of a struggling company may already be witnessing some of the signs of financial challenge e.g. an increasing delay in paying suppliers, stubbornly bumping along at the overdraft limit, asking customers to pay as early as possible by offering unsustainable discounts, difficulty in paying salaries, cancelling repairs and property upgrades, shelving plans to upgrade assets, avoiding calls from anxious creditors etc. Worrying times.

The Insolvency Act 1986 provides guidance about how to determine if a company is insolvent.  Typically, it is simply because a company is unable to pay its debts as they fall due in the normal course of business, or a creditor has taken steps to recover a debt through court action.  Whether it is the type of signs narrated above, or the legal definition is pointing clearly to an insolvent position, a key issue for directors to consider is whether there is a realistic prospect of the company returning to overall solvency and being able to continue trading. A financial forecast/plan is crucial.  But beware, because taking the wrong decision might create personal liability for the director because of the implications of the wrongful trading provisions.  Briefly, if a director knew or ought to have known that a company could not avoid insolvent liquidation yet allowed the business to continue and further liabilities were created, such director can become personally liable for the extent of these liabilities.

Further, it is not uncommon for a director to have forgotten about signing a personal guarantee many years ago in favour of a bank or main supplier, which merely heightens the personal financial exposure in the event of corporate failure.

On occasion, directors will have introduced personal funds to the company in order to support continued trading, but more often the liquidator finds that directors have withdrawn money from the company, further compounding the misery of losing their livelihoods because they are pursued to return cash to the insolvent estate.

Towards the end of 2021, many companies were contacted by their bank advising that repayments should commence in respect of a Bounce-back Loan “BBL”, or a Coronavirus Business Interruption Scheme Loan.  Much has been written recently about the extent of BBLs obtained fraudulently and the desire to pursue directors personally if a BBL has not been used for business purposes. A BBL carries no personal guarantee and was limited to £50,000 or 25% of annual turnover, whichever was less, but there is evidence that some directors overstated turnover in order to obtain the maximum sum of £50,000. The government is keen to apply pressure where a director has acted inappropriately. Also, fraudulently obtained or not, the fact remains that a BBL is part of a company’s list of creditors and will not disappear simply because “the government has already written off billions and my company’s loan will make no difference”.

The ostrich syndrome does little to help when the cash flow either ceases or reduces dramatically. It is a serious issue that requires early, sensible and pragmatic attention.

Rightly or wrongly, some directors used to rely upon HMRC for easy credit terms when cash flow became tight. Frequently, when a formal insolvency occurred, HMRC are  shown as the largest creditor and it is not surprising that in late 2020, a change in legislation gave HMRC a higher right of dividend than unsecured creditors. That said, it is still common for a liquidator to see substantial VAT and PAYE/NIC arrears : just imagine what would happen if unpaid PAYE/NIC became a personal liability on directors when formal insolvency incepted.

Few people are happy to accept that years of hard work are crumbling into financial oblivion before their eyes, but hundreds of companies fall by the wayside every year. If a director is aware that the business is beyond financial rescue, or is rapidly heading in that direction, confidential advice from an experienced source is crucial, particularly if such director wishes to avoid the next hurdle in the form of the Director Disqualification Unit considering whether or not such person should be disqualified from acting as a director of a limited liability company.

If in doubt, ask for help. Don’t wait until it is too late and everything unravels in an uncontrolled manner.

The views in this article are those of Michael J M Reid, licensed insolvency practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.