In a recent case reported by the Insolvency Service, two connected corporate rescue firms, Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited, have been shut down by the UK courts.

Trading under the Atherton brand, these companies claimed to provide struggling business owners with a legal alternative to formal insolvency procedures. However, they misled clients by encouraging them to sell their financially distressed businesses in a manner that allowed them to avoid liquidation while retaining company assets, without accepting responsibility for the company’s debts.

This scheme was supported by five associated companies that purchased the distressed businesses, appointing new directors to distance the original owners from any future legal action.

Mark George, Chief Investigator at the Insolvency Service, stated that the scheme aimed to help former directors and owners disassociate from their company debts while keeping hold of company assets. He added, “These actions appear to have deliberately undermined the insolvency regime, which is why the Secretary of State applied to have these companies, and their associated businesses, wound-up in the public interest.”

Why This Case is Significant: The Risks of Bypassing Proper Insolvency Procedures

For business owners and company directors, this case is a timely reminder of the importance of following the correct legal procedures when considering winding down a company.

Attempting to bypass formal insolvency processes can result in severe legal consequences, including personal liability for debts, damage to reputation, and potentially even criminal charges.

Key Lessons for Company Directors

If your business is facing financial distress, this case offers important lessons to bear in mind:

  1. Understand Your Legal Obligations: The actions you take when your business is on the verge of insolvency are crucial. Seek advice from a licensed insolvency practitioner to ensure you follow the correct procedures and navigate insolvency law appropriately.
  2. Avoid Dubious Schemes: Be cautious of services that claim to help dissolve your company while bypassing your responsibilities. If a solution sounds too good to be true, it likely is.
  3. Follow Legal Procedures: Properly dissolving a company through established legal channels ensures that all creditors are treated fairly, and protects you from personal liability. Any attempt to sidestep these processes can lead to penalties and reputational harm.
  4. Seek Professional Advice Early: If your business is struggling, it’s often best to seek advice early. You may have options available that could allow your business to continue operating without entering insolvency. Addressing the issues head-on, with the guidance of a professional, can help prevent more severe consequences down the line.

If your company is experiencing financial difficulties, we understand how stressful this period can be. Feel free to contact us for professional advice that could help protect you and potentially support your business’s recovery.

For more information, see: https://www.gov.uk/government/news/companies-promoting-corporate-rescue-scheme-shut-down-after-undermining-insolvency-regime