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Continuing To Trade Whilst Insolvent – What Can Happen?

Last updated: June 10, 2021

The quick answer

If you trade as a limited company and allow the situation to get worse you can become personally liable for all the debts. You may also be struck off from being a director if you have acted improperly. 

The main areas of concern for directors are Wrongful Trading (although this has been temporarily suspended because of Covid 19 from 1st March 2020), Fraudulent Trading and Misfeasance. 

In more detail

Sometimes the hardest decision for a director to make is to decide if they can trade out of the current situation or should they stop trading and close? It can be difficult to assess this when you are in the middle of it all and under pressure from creditors.

One of the most sensible things you can do is a cash flow forecast and make sure the business is going to be profitable and that creditors will be overall reducing not increasing. It can also be sensible to take board minutes of meetings as to why you have decided to carry on. This can be useful if you later need to defend yourself against why you made decisions.

You also need to consider suspending any dividends (if you do not have reserves) and be careful not to commit any undervalue transactions or preferences.

If you are having difficulty doing a cash flow forecast or making the decision to carry on we can help you do that. There is no better defence to carrying on trading that having an Insolvency Practitioner agree you are safe to carry on.


If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.

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Author: David Kirk - ACA FABRP
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David Kirk

Licensed Insolvency Practitioner