Reflecting back on our coronavirus support webinar in March, when Lauren Cullen, Insolvency Practitioner at Cullen & Co, talked to us about wrongful trading. Here is a summary of what she advised you should be doing now to protect yourself in the event of your company going into administration.
1. Speak to your Accountant
Your first port of call is to speak to your accountant. They know your business and will be well-placed to support you through your next steps.
Your accountant can look at your company’s financial position and its projections and give advice on what you should do to protect your business and yourself.
2. Speak to an Insolvency practitioner
Your accountant may recommend you speak to an insolvency practitioner just to make sure you are doing the right things for your company. They will make sure you are aware of your responsibilities as a director and that you act accordingly.
In the past, an insolvency practitioner could have pursued a director for liabilities arising after they ought to have known to stop trading. This is known as wrongful trading.
The government has quickly reformed some of the insolvency laws around wrongful trading in an effort to allay director’s fears during the coronavirus pandemic. These circumstances are not normal and the government does not want directors to be frightened by insolvency laws around wrongful trading in these uncertain times.
3. Document your decisions
If you are worried about the viability of your company, it is important to keep records on file of the choices and decisions you are making at this time. This includes documenting your reasons for continuing to trade. This is especially important if your balance sheet is showing you have net liabilities rather than net assets.
The documentation you should record includes minutes from (virtual) board meetings, conversations with your accountant and conversations with an insolvency practitioner if you do speak with one.
If you are worried about your company then we are here to help.