HomeFWJ TakeawayResourcesCOVID-19 pandemic-related risks now facing company directors: part three

As from 1 October 2021, winding up petitions can now be freely used to seeking the winding up of a company (albeit the debt must be at least £10,000, a rise from the previous threshold of £750).

For small businesses and their directors this will come as some small comfort – their businesses will not be at risk of being wound up by creditors with smaller debts. However, for debts below this sum (or those which have already been enforced by the court through to judgment) there may be interest and legal costs to add which could see the sum claimed rise above this threshold.

Conversely, for those businesses whose customers or other debtors are of smaller sums (less than the £10,000 threshold), even if the debt is undisputed, they will not be able to wind up the company which owes the money (and which may be able to repay it if placed into the hands of a liquidator).

This change runs in tandem with a similar increase for bankruptcies in 2016, which saw the minimum threshold rise to £5,000.  However, there are concerns that by doubling this for companies, less companies will be wound up and thus there may be little accountability available for unpaid debts.

There are of course legal alternatives to winding up and a larger number of these will almost certainly be employed in the coming years. These include

But historically the winding up petition was quicker and more cost effective. 

However, unlike in 2016 where there was no recent suspension on  bankruptcy petitions as a result of an international pandemic, currently there are creditors who have been prevented from enforcing their debts for the past 18 months and almost certainly the number of company liquidations will rise considerably during 2021/22 (and for several years hereafter).

For directors, this now means that

However, it is anticipated that government policy will seek to restrict HMRC from pursuing companies to a certain degree, so as to balance the policing of the economy against the same risk to the economy that a large number of winding up orders could bring.

With the winding up of your company comes additional risks:

If you are likely facing such difficulties or want advice early on to mitigate your exposure to such risks, then do not hesitate to contact us.

In my next blog I will address the new legislation going through Parliament which seeks to make directors of companies that have been dissolved (rather than placed into an insolvency process such as administration or liquidation) personally liable for the company’s loss.

Should you require any assistance relating to director accountability, contact our director services team. Whatever your situation, we have almost certainly seen it before and our experience can help you find the solution you need.

Francis Wilks & Jones dealt with all negotiations through to settlement for a sum which I was able to afford. This was a magnificent result and their fees paid for themselves as a result of the settlement which otherwise may have led to bankruptcy proceedings against me. I am very fortunate that I instructed this firm and would have no hesitation in recommending them to any director in similar circumstances

A client who was facing claims by a liquidator for the improper withdrawal of sums from an insolvent company. We negotiated a settlement

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