Nic started this topic @ 16:32 on 28/07/2005
Hi all
I’m in the early stages of a MBO. My business partner and I plan on setting ourselves up as a limited company.
I’m keen to find out all the worst case scenarios if it all goes wrong.
From initial conversations it looks as if we are able to borrow the money we need on an unsecured loan.
We will be making a personal investment that I know we would stand to lose
If the business fails as I understand it I’m not liable for the business debts unless we have made further borrowing with personal guarantees
So what, if anything, happens on a personal level if the business fails, does it effect my ability to get a mortgage in the future? I take it this does not make me bankrupt?
Nic
RE: Limited company liability??
Lillian | 28/07/2005 08:29 PM
Hi Nic,
In response to whether you would become personally liable for debts of a limited company, that would only be the case if you or your business partner personally guarantee any loans made to the company. In brief, if a limited company fails, the company may be petitioned for insolvency, administration or otherwise, however in most cases, the directors themselves would escape personal liability if they have not personally guaranteed any loans, or acted in anyway to suggest that they assume personal liabilities for the company.
Directors do have a number of responsibilities and owe a duty to the company. As to bankruptcy, this would occur if you or someone else petitioned your bankruptcy on the basis that you have failed to pay a debt owing of more than £600. Although this may seem unlikely at present, you should note that in the event you are ever declared bankrupt you will not be able to serve as a director of another company for a period of some 5years.
I hope the above if of use. If you need more information, let me know. I provide a range of consulting services on legal, accounting and general business advisory services. Feel free to browse my website at www.beaconnetwork.co.uk
Good Luck
Lillian
RE: Limited company liability??
emplaw | 28/07/2005 10:24 PM
The level of debt for insolvency is £750 not £600 and the advice given on the period of time before serving in another business as a director is out of date. Please refer to the The Enterprise Act 2002 - Personal Bankruptcy Provisions.
Rue to follow really is to avoid giving personal guarantees and try to raise finance in other ways. If this is not possible always take legal advice before signing any documentation.
Good luck with the new venture
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Lee Schwartz Lime One Ltd
www.limeone.com 01244 852550
