Can I become a director again after closing a company?

If you have closed a limited company for any reason, whether you wanted a new challenge or even if it failed, there’s usually nothing to prevent you from becoming a director again.

However, there are a few exceptions to this general rule. For example, if you were guilty of misconduct, wrongful trading or fraud in your previous role, you can be disqualified from acting as a director for up to 15 years. There are also some restrictions to be aware of, such as not using the same business name if the new company operates in the same sector.

Here we walk you through everything you need to know about becoming a director after closing a company and the various rules that apply.

The only way to close an insolvent company is via a formal liquidation process. As part of that process, the Insolvency Practitioner who is acting as the liquidator will investigate the reasons for the company’s failure and the conduct of its directors.

They will report their findings to the Insolvency Service. If there are examples of misconduct or wrongful or fraudulent trading, you could potentially be banned from acting as a company director for up to 15 years, and you will not be able to start a new company during that time.

Examples of conduct that could lead to a disqualification include:

• Continuing to trade when the company is insolvent
• Making preferential payments to particular (often connected) creditors ahead of others
• Misusing company funds
• Not keeping proper financial records
• Obtaining credit by deception
• Entering into contracts you cannot fulfil
• Failing to cooperate with the liquidator

In reality, bankruptcy or receiving a director disqualification after closing an insolvent company are worst-case scenarios. Both are rare, and in the vast majority of cases, you’ll be able to move on from your failed company and start afresh.

However, if you do go on to start a new company, there are restrictions around the use of the old company’s name. Specifically, any director or shadow director of the old company in the 12 months before the liquidation cannot use the same or a similar name for their new business. That rule applies for five years from the date of liquidation.

The only exceptions are if:

• You get permission from the court to reuse the name
• The new company was trading under the same or a similar name for at least 12 months before the liquidation of the old company
• You buy the assets of the old company from the liquidator of the insolvent company, including its name

Failing to follow these rules is a criminal offence that can lead to a fine or even a prison sentence.

There are a few other important considerations when opening a new company after the insolvent liquidation of the old one, including:

• The requirement to pay a security bond to HMRC – If your old company was closed with outstanding tax debts, HMRC may request that you pay a security bond to protect it against the risk of non-payment by your new business. That can be a significant sum.
• Difficulty securing credit – You may find it difficult to secure credit from suppliers and lenders for your new business, particularly if you operate in the same or a similar industry. They may also ask you to provide personal guarantees.
• Damage to your professional reputation – If you open a new business in the same sector, you may find that former clients, suppliers or partners are reluctant to work with you. Customers may also think twice about buying from you unless you can reassure them about your company’s stability.

Whatever situation your existing company is in, we can assess it, explain your options and help you understand your position as a director.

Closing an insolvent company

If your company is insolvent, we can formally close and liquidate your company via a Creditors’ Voluntary Liquidation (CVL). As part of that process, we wind down its affairs, sell its assets and distribute the proceeds among its creditors.

Once completed, any unsecured debts the company cannot pay are written off, and the business will be dissolved so you can start afresh. You may also be eligible to claim director’s redundancy pay, which can provide some financial stability while setting up your new venture.

Closing a solvent company

On the other hand, if your company can pay all its debts, we will help you determine whether Strike Off or Members’ Voluntary Liquidation represents the most tax-efficient closure method. We can then efficiently close it on your behalf while ensuring all the requirements are met before removing it from the Register of Companies.

If you want to become a director again after closing a limited company, we can explain the potential ramifications for you as a director and help you adhere to the relevant rules and restrictions. We can also guide you through the practicalities of the closure process and explain your options for the future.

Please get in touch for a free consultation and or arrange a meeting at one of our 100+ offices throughout the UK.