But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse.
The action described above can be regarded as wrongful trading; if a liquidator can prove there was wrongful trading then, you are at much increased personal risk. A classic example of wrongful trading is taking credit from a supplier or taking deposits from customers when you know that it is unlikely that you can pay them back.
MVLs are where shareholders choose to wind down their company, and can only be used if the company is solvent.
As a director of an insolvent company, you are at risk if you do not act.If your limited company is insolvent you have a duty as a director to consider whether to stop trading.If you do stop trading you then need to decide on the best way to dissolve (close) your limited company.An IP will sell any company assets, pay company creditors, deal with the affairs of your company and then close your company.They will also investigate your conduct as a director.This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and if eventually the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years.Your company will need to have some money or assets that can be sold to pay the IP's fees.The fees are normally around depending on the size of your business and how much work will be needed to close your business down.After these steps have been carried out, the company is formally dissolved.The law classifies liquidations into two types: voluntary (which is by a shareholders' resolution) or compulsory (by a court order).