Q&A – personal financial problems affecting company involvement

1. Question: I’m starting up a brand new IT-design business with a couple of other consultants and contractors who’ve got experience in the field.

2. But one person in this new and gradually forming business owes the government some money relating to tax. How would this debt affect the business earnings in terms of him, the other founding members & the business as a whole, if at all? Unfortunately you are not very clear from your question exactly how this person wishes to become involved in your company. The three possibilities are: as an Investor (i.e. shareholder), a Director and as an employee. Of course, the person may be all three. An individual’s personal financial circumstances are irrelevant to them becoming an Investor/Shareholder and you should have no worries in these circumstance. Equally, if the person intends to be nothing more than an employee, other than a possible “Direct Earnings Attachment Order” imposed by the courts, then their personal finances will have no effect on your company . The only situation where your company may be affected would be if this individual were to become a Director and subsequently, due to court

3. proceedings, prevented from acting as a Director in the future by the courts. This would be very unusual and is only relevant where the individual’s money problems resulted from a previous company involvement when also acting as a director. So in summary, it is highly unlikely that you should have any concerns about the possibility of one of your participators running into personal financial difficulties.