I Cannot Trade on After Christmas

We get many people who call us and say that they cannot trade on after Christmas. It is a sad fact that Christmas sees the demise of many businesses. It is a tough time to close a business as it has the propensity to ruin the festive period for people, but as a director you have a legal obligation to make sure that you close an insolvent business as soon as you know that it cannot be turned around. To do anything less would be to open yourself up to the danger of a wrongful trading action.

If you cannot trade after the closure for the Christmas break, you actually need to take steps about three to four weeks before Christmas, to close the old company. This has a two fold effect. If you take steps to liquidate your company early, you will have time to create a new limited company, and put steps in place to put any new works into this venture.

It takes about three weeks to get together all the information needed to prepare a statement of affairs for a meeting of creditors and give statutory notice to creditors of the meeting. A qualified insolvency practitioner is the only person qualified to do that. To help the IP you need to get together a statement of all your creditors and also your debtors and other assets. These are put into a financial statement which proves that you cannot pay your debts as and when they arise, or that that your liabilities are greater than your assets. Faced with this the creditors have no choice but to vote to wind up the company.

It is often the case that you will be able to negotiate a deal with the liquidator of the old business to buy back the assets, such as they may exist, and any customer lists and work in progress.

If the business is one which needs protection to continue to trade, then this can be achieved via an Administration Order, which places legal protection over the business whilst a plan is put in place to get a better realisation for creditors, save the business as a going concern or put in place a CVA.

So if you find that you will not be bale to trade after Christmas, you need to be taking active steps now to get a professional on board to help you.