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July 8, 2015 0

The short and sweet answer to this question is no, it cannot. Once the decision has been made to force a business into liquidation there is very little to no way back for the company and its directors. Directors should cease trading immediately; although there may be some special exceptions where the completion of contracts can aid the collection of debts from the company. But absolutely no further credit should be taken in this circumstance.

The main objective of a liquidation order is to close a business down and cease all trading across the board. So companies aren’t usually given the opportunity to continue trading at this stage anyway, as a licensed practitioner will take over proceedings as the company is wound up. But what about trading before the company is liquidated?

Can a Company Continue to Trade Whilst Insolvent?

Being insolvent is different to liquidation – insolvency is a state whereas liquidation is a resolution. When a company is insolvent it means it is unable to pay the debt it owes; this is the first step towards possible liquidation. In this state there are a number of options available to rescue the situation; but if none of these are feasible or applicable then liquidation will occur and the company will be shut down.

When a company is insolvent directors must adhere to certain requirements and legal duties, all of which act in the best interest of the company’s creditors. The company must cease trading in this case as not doing so will be deemed as wrongful and improper. If the appointed liquidator uncovers signs of wrongful trading in his/her investigation into a company, directors will be prosecuted. This could result in a ban from directing a limited company for up to 15 years.

It’s straightforward really, to avoid further troubles simply stop trading if your company is insolvent or entering liquidation. In some rare cases there may be an exception, but you must first consult a professional practitioner to see if this is applicable. Contact us today for more information if you find yourself in this position, or browse our site for further business insolvency advice.


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