Insolvent business

Looking for advice here - (obviously will ask for professional elsewhere, but curious what posters think)

Say if a friend of mine was involved in a private company that is seriously running out of money but continuing to trade (arguably recklessly, arguably naively) in the hope of a turnaround.

The decision maker is the owner who would lose everything in the event of goign to the wall so he is pushing on in the vain hope of a turnaround.

In that event, who is obliged to blow for time up? My friend, the employee accountant? The auditors? The bank? Anyone else? Or do you just wait until the cheques start bouncing and the bank realises?

What is your friend's relationship with the company?

Are they a shareholder, or a director?

The answer to these questions will have a bearing on their level of responsibility.

No neither.

She's not concerned about her role as such, just wondering if it's anyone elses

Generally speaking it is the directors responsibility to call a halt if they see that there is no future for the company, and by continuing to trade, they are knowingly taking credit ( this could be from suppliers, the revenue or their staff) which they will not be able to pay.

It is also their responsibility to ensure that they have proper reporting systems in place so they are made aware of any problems.

How would a director go about that (calling a halt)?

There is one other director (not the owner) who might have half a mind to do that.

To be honest, I'm not too sure of the mechanics of it. Most likely it would be initiated through the companies auditors, but I will defer to more expert minds.

re Auditors - see, I was advising along those lines too, but I don't know the specific grounds...

The non-executive director needs to get advice from an insolvency practitioner.

He will not be able to argue that he didn't know about the financial state of the company and could, in a worst case scenario, be made personally responsible for the debts of the company.

Brendan

Through an accountant, the directors need to speak urgently to an insolvency practitioner. With all the facts to hand and with full knowledge of the mechanics of the possible wind up, the directors can then make an informed decision.