BANKRUPTCY RESTRICTION ORDER

Administered by The Insolvency Service, bankruptcy is a type of insolvency that enables individuals to write  off unsecured personal debts that they cannot afford to repay in a  reasonable amount of time.

As Glenn is made bankrupt, creditors cannot take any additional legal action against the individual to recover debts, nor can they  continue to demand payments, charge interest on outstanding debts, or contact the bankrupt individual.

Bankruptcy will be registered on his credit file for six years.

As a bankrupt, Glenn Anthony Armstrong cannot be a limited company director until the  court lifts his financial restrictions and discharges him from his debts. This usually happens 12 months after the date of the bankruptcy  order, but it will likely be longer in Glenn's case. As an undischarged bankrupt, he is also  prohibited from being involved in a limited company in a number of other ways, detailed below.

Bankruptcy has a significant impact on limited company directors. Pursuant to Section 11 of the Company Director's Disqualification Act (1986):  

It is an offence for a person to act as director of a company or  directly or indirectly to take part in or be concerned in the promotion,  formation or management of a company, without the leave of the court,  at a time when […] the person is an undischarged bankrupt in England and  Wales or Scotland, or Northern Ireland.

This means that, until Glenn is discharged from his bankruptcy order, he may not (without the court’s permission):

• be appointed as the director of a limited company
• continue acting as the director of a company
• be involved in the registration, management, or promotion of a limited company
• act as an LLP member
• be involved in the registration, management, or promotion of an LLP’s business or affairs
• manage a business under a different name, without informing the  people that you do business with that you are an undischarged bankrupt

Furthermore, he cannot borrow more than £500 without informing the  lender that he is bankrupt, all of these bankruptcy restrictions will remain in place until his bankruptcy ends.

If he is the only director of a limited company and is bankrupt, he must resign. 

This means that his companies will be  dissolved. If he wants to keep the company active, he will need to  appoint another director to run it for him. However, this must be done  before he is declared bankrupt, otherwise the company will be wound  up.

If he chooses to appoint a replacement director, he can continue to  work for the company as an employee. He must refrain from having any  involvement in the management of the business until he is discharged  from the bankruptcy order, unless you get permission from the court.  

This means that he cannot carry out any directors' duties or influence the actions or decisions of the new director in any way.

Failure to adhere to these restrictions could result in an extension  of his bankruptcy order. He could also face criminal charges.

If he is also a shareholder, his company shares will pass to the trustee who is appointed to manage  his bankruptcy. His trustee will either be an official receiver or an  insolvency practitioner.

If he is a sole director but he does not have any shares in the  company, the shareholders may choose to appoint another director to  replace him, thus enabling the business to continue after his resignation. The new director must be appointed before his bankruptcy begins. Alternatively, if no replacement director is appointed, the company will be wound up.

When Glenn became bankrupt and the company has other directors, he must notify them immediately and resign from the company. He cannot be reappointed as a director or have any involvement in running the  business until his bankruptcy order has ended, although he may be an  employee of the company. 

Bankrupt individuals, including those who were company directors, can operate as sole traders. However, certain restrictions will be imposed until the bankruptcy order is discharged.

Glenn must trade under his own name, or the name under which he traded when he was declared bankrupt. This name must be clearly shown  on all business paperwork.

Additionally, he cannot obtain credit in excess of £500 without informing the creditor that he is an undischarged bankrupt.

Bankruptcy, along with all of the imposed restrictions, will end when Glenn is ‘discharged’ from his bankruptcy order. This is normally  one year after being made bankrupt. 

Once Glenn has been discharged, he can be a company director. This  means that he is free to be reappointed to the company from which he resigned, be involved in the management and promotion of a company, or  register a new company.

If, however, a Bankruptcy Restrictions Order (BRO) is made against  him, which would be extremly likely, the restrictions under the bankruptcy order could remain in place  for a period of up to 15 years, which could prevent him from acting as a  company director during the allotted time.

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