Losing your business to liquidation, voluntary or otherwise, is never anything but a crushing blow. In the eyes of the law, it classifies your business as an inoperable failure and dissolves your business in order to pay back the debts accrued over its existence. Accepting the situation and appointing an insolvency practitioner are the first steps in having your company liquidated, but what about life after liquidation? Can you become the director of another company? Are you allowed to start a new business? Will liquidation affect my credit rating? These are all entirely valid questions, and we’ll strive to answer them below.
Q: Are you allowed to become director of another company after liquidation?
A: The short answer to this question is yes, as there’s nothing in insolvency law which stops you from acting as a director of a business once your company has entered liquidation (or any other form of insolvency procedure). There are two exceptions to the rule which may bar you from becoming a director. The first of those exceptions is that if you are personally bankrupt then you cannot act as a director. As a bankruptcy order usually lasts for 12 months within the UK, wherein an individual is banned from forming, managing or promoting a limited company unless they have direct permission from a court. The second exception is that a director can be disqualified from acting as such if an action is being taken through the courts by the Secretary of State (acting through the Dpt. Of Business, Innovation and Skills). These two exceptions aside, there’s nothing stopping you from acting as a director of a company.
Q: Are you allowed to start a new business following liquidation?
A: Absolutely, yes. There is nothing in the law which states that you cannot start a new business following the liquidation of your previous business. The only law surrounding this directly prohibits you from using the same or a similar name as your old business. This is to prevent creditors becoming confused and under section 216 of the Insolvency Act of 1986 it could lead to either criminal action against the director or being held liable for all of the debts the company owes should the new one go into administration too.
Q: Will liquidation affect my credit rating?
A: Sadly, yes. Credit reporting agencies will record a company’s liquidation against your personal credit file. This is understandable, as an insolvent business doesn’t reflect too well on the financial abilities of the individual. There are ways to take some control over the process, however. If your business was voluntarily liquidated you will be able to better explain the events leading up to liquidation, which will go on your credit file.