Can You Be A Director Of Another Company After Liquidation?

Man writing on paper with a mechanical pencil

A question we often get asked by concerned clients is “can I be a director of a company after liquidation?”. The short answer is yes, absolutely. If a director decides to liquidate their company there is no reason they should be prevented from becoming director of another company, so long as there has been no evidence of directorial misconduct.

So what’s the process involved in determining whether you can be a director of a company after liquidation?

Once the decision has been made to place the company into voluntary liquidation, a licenced insolvency practitioner will be appointed to investigate the financial affairs of the company, including the conduct of the director. Directors are protected by a limited liability framework unless they have made personal guarantees or knowingly partaken in wrongful trading (more on this in just a second).

The conduct of all directors in office in the 3 years leading up to the date of insolvency will be investigated and submitted to the Department for Business, Energy and Industrial Strategy (DBEIS) in a confidential report. If the DBEIS have concerns about the conduct of a director they will take further action, which in the most extreme case can involve applying for a court order to disqualify the director from being involved in the management or formation of another company. Under the Company Directors Disqualification Act 1986, disqualified directors can be banned from directing another company for up to 15 years, can be fined and may even face loss of personal assets.

This is why if you ever have concerns about an insolvency issue you should seek professional advice. At My Liquidation, we offer free, no-obligation advice to directors, including advice on how to place your company into voluntary liquidation according to legal requirements.

When’s The ‘Right’ Time To Liquidate?

If you know that your insolvent company is in trouble, the best thing you can do is to speak to an insolvency practitioner. Amongst other insolvency options, we will consider whether it is right for your company to enter voluntary liquidation. If company directors continue to trade knowing that they are insolvent e.g taking a deposit from a customer when they know they cannot pay that customer back, then they could be held personally liable.

With this in mind, when going back to the question of “can I be a director of a company after liquidation?”, the answer is ‘yes, so long as you liquidate when it’s right and in line with the necessary legal requirements’.

If you are looking to close your insolvent company, you should look to place your company into a Creditor’s Voluntary Liquidation (CVL). CVL is the process appropriate for companies that are insolvent i.e cannot pay liabilities when they fall due and differs from Members Voluntary Liquidation (MVL), which is appropriate for companies that are solvent i.e their assets are greater than their liabilities. The decision to place a company into CVL will be voted upon by shareholders at an extraordinary meeting convened by the board of directors and overseen by a licenced insolvency practitioner. Creditors must be given notice and are able to appoint the liquidator themselves.

Protecting Yourself & Others In A CVL

It is important that company directors are aware of their responsibilities in the CVL process, which is why it is important to seek professional guidance. Company directors are responsible for preparing a Statement of Affairs that sets out the company’s assets and liabilities and presenting this to creditors prior to the extraordinary meeting. Whether intentional or accidental, failure to provide accurate information in the Statement of Affairs could impact a person’s ability to be a director of a company after liquidation in the future.

So if like many of our clients, you’ve been worrying about “can I be a director of a company after liquidation?” hopefully you should now have your answer.

It is also worth noting that if you are planning on becoming the director of another company following liquidation, the new company cannot have the same or similar name as the liquidated company. This is prohibited under Section 216 of the Insolvency Act 1986. Any breach will be considered by the DBEIS within any disqualification action.

Finally, just before we sign off, we’d like to make a final note about the opportunity for directors of a liquidated company to make a redundancy claim from Redundancy Payments Service. Again, one of the team at MyLiquidation will be more than happy to provide you with more advice on this, so don’t hesitate to get in touch.


Contact Us

I'm looking for more information on ...


Choose from the options below