www.iva.co.uk

I am currently trying to arrange an IVA but as my largest creditor is MBNA I am starting to get a little worried about its chances of success. I run a small company (employing myself and a apprentice) which is profitable but not hugely so, has a full order book to July and I am having to turn work away. At the moment I cannot safely draw a salary of more than around £1100/month gross without threatening the viability of the business. I have no assets other than 50% of the equity in the company. Obviously if I am made bankrupt I cannot be a director of the company, and without my day to day involvement the business will not work.

Is there a mechanism by which I can place the company in administration (to protect the company from my personal creditors forcing me to liquidate it to pay my personal debts), continue to run it for a year under the supervision of the administrator, then regain control once my bankruptcy is discharged?

Alternatively, can I sell my 50% share to my wife (the money would obviously go to my creditors in the bankruptcy), have her appointed as the sole director and bank account signatory, and then run all business decisions past her on a daily basis?

What really annoys me is that this is exactly the kind of situation that IVAs were introduced to deal with, but while some creditors refuse to co-operate with the IVA system, I am having to consider all options including the nuclear one (bankruptcy).

Richard

Hi Marshal,

Does the company have any assets itself ? Tools/plant/equipment/premises etc. ?

-Best

'5 years sticking my head into the Lion's mouth of debt !'

Very roughly - stock £4K, vehicles £4k, tools £2K, cash £1K, work in progress £4K. Against that I have about £4K in trade creditors, £6K in customer deposits. And the premises are 4 months into a 3 year lease. By the time the landlord has put in a bid for 2.5 years rent in lieu of notice, the shareholders (Mrs M and myself) aren't likely to see much of a return on liquidation...

Richard

Hi Marshal

I'm somewhat winging it here but I think you might be worrying unnecessarily.

Your company is a separate legal entity to you. There's no way that I can see that your creditors can directly get at it to settle your debts, unless you have taken out business loans with personal guarantees.

Based on what you said, the company isn't technically worth anything, which definitely works in your favour as it means effectively neither is the shares. So no-one is going to be interested in taking them from you in settlement of debts. Also they would be mad to do so as if the business fails bang goes your income, which is in no-ones interests.

Even so you might be better with wife as director and shareholder, but she doesn't need to pay you anything except a nominal amount. I think you may be allowed to remain Company Secretary.

This setup covers you better in the event of ultimate Bankruptcy, as you are then technically an employee, although it's obviously a bit 'rigged' so probably the longer you can get away with not going bankrupt the better, to allow things to settle down.

-Best

'5 years sticking my head into the Lion's mouth of debt !'

Hi there

Your idea of an administration is like using a sledgehammer to crack a nut. Technically possible, but costly and unecessary. As go for broke says, the value is in the shares, and it does not appear that they have any value at present.

In deciding whether an IVA is a sensible option, you must be sure about the future of the company as it is providing you with your only source of income at present.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk