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If you are a Company Director can you go Bankrupt?
If you are a company director you can go bankrupt. However you first need to resign your position. In accordance with Section 11 of the Company Director’s Disqualification Act (1986) you are not allowed to act as a director while you are bankrupt.
You can resign at any time before you apply. However you should do so no later than the date of a Bankruptcy Order being made against you.
If there are no other directors in the company you must appoint a replacement before you resign. This is because a company must have at least one appointed director at all times.
If you are the only director of a small company you must appoint a replacement before you resign.
Can you Continue Working in your Company?
After you have resigned you can still work in a company as an employee. You will need to take a monthly salary with the relevant amounts deducted for tax and national insurance.
However you must not be involved (directly or indirectly) with promoting, forming or managing the company. This would include making strategic decisions about its nature and direction.
If you continue to work as an employee you are allowed to carrying out day to day activities associated with your job. However you must not make decisions which would normally have to be taken by a director. You cannot continue to act as such in everything but name.
If you continue to act as if you were still a director while you are Bankrupt you could face an extension to your bankruptcy and even criminal charges.
How long after Bankruptcy can you be Reinstated as a Director?
You will normally remain bankrupt for 12 months. After this time you will be automatically discharged. Once discharged you are no longer bound by the restrictions of bankrutpcy.
This means you can then be immediately reappointed as a director if you wish. You can also resume your involvement in the management of the company.
The only time you cannot be reappointed immediately after your discharge is if a BRU or BRO has been issued against you. If so you must wait until after the Restrictions Undertaking or Order is finished.
If you have a BRU certain restrictions upon you including not being able to act as a company director remain in place after your discharge date.
Effects on your Company if you go Bankrupt
You and your limited company are separate legal entities. In the same way that you are not liable for the company’s debts (unless you have given personal guarantees) the company is not liable for yours.
As such if you go bankrupt your company’s finances including its bank account should not be affected. However for smaller owner director companies there may be a problem if the company’s account is held at the same bank as the director’s personal account.
If you resign as a company director your shareholding in the business remains. Your shares are a personal asset. If they have any material value your financial interest in them will have to be bought back from the Official Receiver.
We are experienced in assisting company directors with bankruptcy. Give us a call (0800 044 3194) or complete the form below for advice.