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When a company enters administration or liquidation, the insolvency practitioner takes control of its assets and distributes them to creditors. This process follows a strict legal framework known as the insolvency hierarchy, which determines the order in which creditors are paid.
Wrongful trading occurs when directors continue trading once they know, or should have known, that the company cannot avoid insolvent liquidation. At that point, directors must stop trading and take every step a reasonably diligent person would take to minimise loss to creditors.
Limited company directors often worry about personal liability for business debts. Fortunately, UK law offers strong protection through the principle of limited liability.
Striking off, or dissolving, removes a company’s name from the Companies House register and ends its legal existence. Directors must stop trading immediately once dissolution completes.
Attempting strike‑off with HMRC arrears almost always fails. HMRC routinely objects, viewing the move as deliberate tax avoidance, and may escalate matters by filing a winding‑up petition. This forces the company into compulsory liquidation, triggers a formal investigation
When creditors win a warrant of control, bailiffs can seize and sell business assets to recover debts.
