With a CVL, all debts of the company which cannot be repaid following the sale of company assets, will be written off. This is because a limited company is classed as its own legal entity, and not as an extension of its directors or shareholders. When a company is liquidated, it ceases to exist, and therefore any debts which remain outstanding are no longer recoverable; in essence, the debts die with the company.
The exception to this is if the director has personally guaranteed any of the company’s borrowing. If this has been done then at the point of liquidation the personal guarantee will crystalise, and the responsibility for paying the remaining amount of the borrowing will fall to the director who will be expected to use personal funds to service the debt. Directors can also be held personally responsible for company debts if any instances of wrongful or fraudulent trading is uncovered during the conduct investigation.
However, as long as no misconduct has taken place and no personal guarantees have been given, outstanding company debt – including that owed to HMRC – will be written off as part of the liquidation process.