Many directors fear insolvency, but acting early can make all the difference. Here’s a real case study of an engineering business that faced mounting HMRC debt and creditor pressure, and how Chris Worden helped the director regain control.
- Director delayed action, leading to spiralling HMRC debt
- Over £300,000 in unsecured debt, including VAT and corporation tax
- Compulsory liquidation was a real threat
- Chris Worden guided the director through voluntary liquidation
- Director’s home was protected by negotiating a settlement
- Early advice is crucial—don’t wait until it’s too late
Background: How Problems Escalated
The engineering company, based in the Northwest, had a strong order book but cash flow collapsed. The director fell behind with HMRC payments, including PAYE, VAT, and corporation tax. Attempts to set up Time to Pay (TTP) arrangements failed, and supplier debts mounted. Overdrafts were maxed out, and the director became overwhelmed.
Debt Breakdown
- Corporation tax: £200,000
- VAT: £70,000
- PAYE: £30,000
- Bank overdraft: £19,000
- Trade creditors: £8,000
- Accountants: £2,000
- Personally guaranteed debt: £50,000+
- Overdrawn director’s loan account: £165,000
Facing Insolvency
The business was both cash flow and balance sheet insolvent. HMRC was threatening a winding up petition, and the director risked losing his house. Chris Worden explained the options: CVA, administration, or liquidation. Given the debt levels and lack of rescue buyers, a creditor’s voluntary liquidation was the safest route.
The Liquidation Process
- Gathered all financial information and creditor lists
- Prepared a statement of affairs
- Explained the process and director’s duties post-insolvency
- Communicated with staff about redundancies and claims
- Brought in an insolvency practitioner to manage the process
- Negotiated settlements on personally guaranteed debts and the overdrawn loan account
Protecting the Director’s Home
Chris Worden helped the director understand how insolvency practitioners assess overdrawn loan accounts. By providing full disclosure and negotiating, the director settled a £160,000 loan account for £22,000, protecting his home and avoiding bankruptcy.
Key Takeaways
- Don’t delay seeking advice—early action preserves options
- Full financial disclosure is essential
- Liquidation can offer a fresh start and protect personal assets
- Specialist advice from Chris Worden can make a huge difference
- Directors should not ignore HMRC or creditor letters
Frequently Asked Questions
- What is a creditor’s voluntary liquidation?
- A process where directors choose to close an insolvent company, appointing a liquidator to sell assets and pay creditors.
- Can I protect my home if my company goes into liquidation?
- With the right advice and negotiation, it’s possible to protect your home, especially if you act early and disclose all assets.
- What happens to staff during liquidation?
- Staff are made redundant but can claim redundancy pay, unpaid wages, and holiday pay from the government.
- What is an overdrawn director’s loan account?
- It’s money the director owes the company. In liquidation, the liquidator may seek repayment, but settlements can be negotiated.
- Why is early advice important in insolvency?
- Early advice gives more options, helps avoid personal risk, and can lead to better outcomes for directors and creditors.
Need Help?
If you’re facing similar challenges, don’t wait. Contact us for confidential advice from Chris Worden and the Director First team.
