This page provides an overview of how a business bankruptcy can differ from a personal bankruptcy. It describes how it can affect you both as a business owner and concerning the bankruptcy itself.

Please note that a different level of understanding is required for a business bankruptcy. Please only seek help from someone with good work experience.

What will happen to my business?

If you are a sole trader, your business will either be shut down or allowed to continue trading. The reality is that closure is highly likely. What happens to your business largely depends on several factors, including:

If your business is of a significant size, a bankruptcy trustee will be appointed. The trustee must do what is best for the bankruptcy estate. If this sells all the business assets, that will happen.

If you are a partner in a partnership, you should realise that matters are more complex. The partnership will automatically dissolve upon the making of a bankruptcy order against one of the partners unless a partnership deed provides for otherwise. This may result in the bankruptcy trustee bringing proceedings to realise the bankrupt’s interest in the partnership.

What additional dangers are there in a business bankruptcy?

You will need to consider several additional consequences of a business bankruptcy. These include:

  • Possibly, more attention should be given to the official receiver or the trustee in bankruptcy.
  • Obligation to provide three years’ worth of accounts. This often causes people problems and can lead to a bankruptcy restrictions order.
  • There is a greater risk of having your bankruptcy restrictions prolonged beyond bankruptcy due to the consequences associated with tax debt and trading whilst insolvent
  • You are being left without the ability to earn. If your lifestyle has been financed through your business, the closure of this business will leave you without any means of paying your bills.
  • If you stay in business, a damaged reputation
  • Suppliers unwilling to grant you credit
  • Difficulty in getting a business bank account: you may not be able to get one.
  • Unable to get specific licenses
  • Barred from certain associations
  • Although discharge from bankruptcy will alleviate some of the above consequences, many will remain for some time after.

What if you are a company director

If you are a company director, you will be prohibited from being a company director without leaving the court when you are bankrupt. This will cause you a problem if you intend to return to business through a limited company immediately following the bankruptcy order.

Many people think tt is possible to make a relative or friend the director while trunninga company. There are several problems with this. The restrictions of bankruptcy not only prevent you from being a company director, they also prevent you from acting as a company director or being concerned in its promotion, management or formation. Breaking these restrictions could place you in contempt of court and disqualify the director supporting you.

Making yourself bankrupt

If you run a business as a sole trader, then you will make yourself bankrupt in the usual way. The business bankruptcy forms are the same – bankruptcy forms.