Recently I was called out to see a director who explained that her company (ABC Limited) was insolvent and needed to enter an insolvency procedure.

I arranged to see the director, that afternoon, and at the meeting was the director herself (Tina), the bookkeeper (Dianne) and the director’s brother (Peter). There was an associated company which ran along side ABC Limited of which Chris and Tina were also directors.

I listened to the problems that the company had faced and went through the assets and liabilities with Tina and Dianne. When we went through the liabilities I was careful to ask which had been personally guaranteed by Tina. The company was clearly insolvent, losing money on a weekly basis, no likelihood that this position would change and no real business worth rescuing – so there was no alternative that the company enter Creditors Voluntary Liquidation.

Having identified some personal guarantees I suggested to Tina that we should have a brief conversation about her personal financial position.

Clearly, the demise of the company would have a serious knock on effect into Tina’s personal financial position – and was very relevant. I quickly found out that Tina owned a property jointly with her partner, but was in negative equity. Together with the personal guarantees that would flow from the liquidation of the ABC Limited Tina had personal unsecured debts in the region of around £60,000. Tina’s partner had a modest income and Tina was just about to be made redundant.

We discussed the possibility of an IVA or bankruptcy – it was agreed that bankruptcy would be the best solution to deal with Tina’s problems.

Tina was visibly relieved that we had identified the best plan for her to take regarding her personal financial position – even though we had not been called in to discuss this.

Later, Tina explained to me that she had seen two insolvency practitioners prior to us being recommended and none of them had mentioned that it may be useful to discuss Tina’s financial position and how this would be affected by the liquidation of ABC Limited.

This is something that Griffin & King will always consider without being prompted but clearly not all IP’s are entirely familiar with personal debt and would not think that often one can run into the other. Some IP’s do not to take any IVA/bankruptcy appointments – so they must be fairly inexperienced in this area.

It is fairly rare to find an owner managed company without the director having given personal guarantees to a bank or other creditors. The directors need to be aware of the implications of these as soon as possible – and not when a nasty letter comes through the door months after the company has gone into liquidation.