What to do next
Get advice before you act, not after
Preferring one creditor, moving assets, or continuing to incur debt while insolvent can create personal liability and later be reversed. This is the highest-risk period for directors.
Understand the restructuring options
Formal proposals or restructuring proceedings can allow a viable business to continue while compromising debt. Canada uses proposals and CCAA proceedings; the US uses Chapter 11 reorganization.
Protect employees and yourself properly
Payroll taxes and certain employee amounts frequently carry director liability. Deal with them deliberately and document every decision as insolvency approaches.
Frequently asked questions
Can directors be personally liable?
Yes, in defined circumstances — unremitted payroll taxes and certain employee entitlements are the most common. Trading while insolvent can add further exposure.
Can the business be saved?
Sometimes. Formal restructuring exists precisely to preserve viable businesses while compromising debt. The earlier advice is taken, the more options remain.
Can I pay some creditors and not others?
Be very careful. Preferential payments before insolvency can be reversed and can expose directors to liability.
What happens to employees?
Employees become creditors for outstanding amounts, and statutory protections and wage-earner programs may apply. Their claims often rank ahead of ordinary creditors.
This is general information, not legal advice. Laws vary by location and every situation is different — speak with a qualified lawyer about your specific circumstances.