Stunning lack of UK Ltd company Directors knowledge revealed as Brexit looms
A new survey of 250 UK Limited company Directors by www.CompanyHelp.co.uk with polling by Google Surveys has revealed shocking levels of mis information, lack of understanding of key financial facts and also the precarious business situation UK’s Limited companies are in.
According to the survey results a shocking 60% do not fully understand how a Directors Loan account functions. Over 26% of Directors incorrectly said a Ltd company protects Directors from all debt liability. Over 36% of Directors incorrectly said if they own a company the money in it is theirs. 47% of Directors also said they did not know the quick cash flow or balance sheet tests to determine if a company is insolvent.
Andy Clay spokesperson for www.CompanyHelp.co.uk with over 25 years Insolvency Practice experience said: “This data is actually quite shocking when laid out plainly for all to see. Whilst for those of us involved in the Insolvency business the issues of overdrawn loan accounts and wrongful trading are an everyday occurrence, it is clear there is a problem here which needs to be addressed. For such high numbers of UK Directors to not have basic understandings of corporate governance is alarming, especially if business takes a downturn.
Some of the misconceptions we see on a regular basis ring true with this survey data. There is a frequent lack of understanding about personal guarantees involving company debt such as overdrafts or borrowing. Even trade supply agreements now routinely come with Directors personal guarantee clauses in the small print and a lot of Directors are horrified to learn they are personally liable for that debt. A lot of Directors still do not understand that a Limited company is a separate living breathing legal entity and a sole trader attitude towards taking money from companies thinking it’s their own cash is what puts a lot of Directors into a position of owing a failed company money and facing not just company liquidation but also personal bankruptcy.”
The survey also revealed the biggest business fears for company Directors for 2017 being Brexit 27%, late payments 14%, staff costs 13% and workplace pensions 6.5%.
Quite alarmingly over 20% of Directors surveyed also said if one or more creditors failed to pay in 2017 they were at risk of insolvency highlighting a large number of businesses that are too reliant on just one main source of income .
Andy Clay commented again: “It certainly looks like business confidence is falling away with only 15% of Directors saying Brexit will have a positive impact on their business we could be heading into very troubled times”