Companies undermining insolvency rules shut down

In a recent case reported by the Insolvency Service, two connected corporate rescue firms, Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited, have been forcibly shut down by the UK courts.

These companies, trading under the Atherton brand, claimed to offer business owners struggling with debt a legal alternative to formal insolvency procedures. However, they misled their clients by encouraging them to sell their financially distressed businesses in a way that would allow them to avoid liquidation and retain company assets without taking responsibility for the company’s debts.

The scheme was supported by five associated companies that bought these distressed businesses and appointed new directors to create distance between the original owners and any future legal actions.

Mark George, Chief Investigator at the Insolvency Service, in speaking about the case highlighted that this scheme was an attempt to help former directors and owners disassociate themselves from their company debts while retaining any assets. He said: “These actions would appear to have deliberately undermined the insolvency regime which is why the Secretary of State applied to have them and their associated companies wound-up in the public interest.”

Why this case matters: The risks of avoiding proper insolvency procedures

For business owners and company directors, this case serves as a good reminder of the importance of adhering to the correct legal procedures when considering the dissolution of a company.

Attempting to sidestep formal insolvency processes can lead to significant legal consequences, including personal liability for debts, reputational damage, and even criminal charges.

Key takeaways for company directors

If your trading company is facing financial difficulties, this case highlights some important things to remember.

• Understand your obligations: The actions you take if your company is going insolvent are important. Therefore, get advice from a qualified professional, especially a licensed insolvency practitioner, on the correct procedures so you have the guidance you need to navigate the complexities of insolvency law.
• Avoid misleading schemes: Be wary of any service that promises a way to dissolve your company while avoiding your responsibilities. If it sounds too good to be true, it probably is.
• Follow the law: Properly dissolving a company through established legal channels ensures that all creditors are treated fairly and that you avoid personal liability. Trying to circumvent these processes can result in penalties and damage to your reputation.
• Seek professional advice early: If your business is struggling, oftentimes the earlier you get help the better. You may have options that would help you continue your business without the company going insolvent. It is always better to address issues head-on with the help of a professional rather than delaying and risking more severe consequences later.

If your company is experiencing financial difficulties, we realise what a stressful time this can be. Please feel free to get in touch at any time and we would be happy to help you with advice that can help you protect yourself and potentially to help your business survive.

See: https://www.gov.uk/government/news/companies-promoting-corporate-rescue-scheme-shut-down-after-undermining-insolvency-regime

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