Will bankruptcy of owner affect business?

September 29th, 2007 by Questions

I own a healthy business (incorporated) with good cash flow and increasing profits. Due to reckless speculation I have lost significant amount of money. I owe about 625,000 dollars to various creditors , my business owes about 475,000 dollars to suppliers and employees. I have about 125,000 dollars worth of assets and my business has about 750,000 in inventory , machinery and accounts receivable. The business is built on my personal reputation and will lose all clients if I cease to operate it.

If I declare bankruptcy what will happen to my business?
Will the business be declared insolvent? Will the employees get laid off and the inventory and machinery sold? Will my suppliers get their money? Will existing contracts be honoured?

Questions

One Response to “Will bankruptcy of owner affect business?”



, Barton Goth GCO Bankruptcy Trustees said:

If you file for bankruptcy there are two issues that come up.

Firstly, when you file a bankruptcy you are no longer eligible to be a director of a limited company (this is under both the provincial and federal legislation).

Secondly, the shares you own in the company are a personal asset and are something that are not protected when you file a bankruptcy (i.e. they ultimately vest in the trustee who must realize on those shares for the general benefit of your creditors). Now this doesn’t mean your company will be lost, you are the most likely party to be interested in buying the shares from the bankruptcy estate, the only trick is that it will cost you the equivalent value of the company.

As you can see these are two significant issue that need to be overcome and may suggest that a Proposal may be a better fit for your situation (as it doesn’t have as extreme of an impact on business) although this is an issue that you are better off to discuss with a local trustee as it is a bit to lengthy for this type of forum.

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