Trust deeds

  • Even if your business is insolvent, you may be able to make an arrangement to pay back creditors over time which means you may be able to carry on trading.
  • You would not be doing anything wrong if there is a reasonable prospect of being able to trade out of your difficulties.
    If you are finding it difficult to get creditors to agree to your repayments offers, a trust deed is a more formal way of negotiating with them.

Sole traders

As a sole trader you can enter into a trust deed.  This is set up by an insolvency practitioner. It is a legally binding agreement to pay back creditors over a set period of time. This can be monthly instalments, a lump sum payment, or a combination of both.

See our fact sheet:

Trust deeds.

There are fees to set up a trust deed but these can normally be taken from any payments you make into the trust deed, instead of being paid up front. Business and personal debts can be included and you would normally be able to carry on trading. However, it could mean that you have to include business and personal assets in your trust deed.

You may also find it more difficult to get business banking or credit facilities. This is because the trust deed would be recorded on your credit reference file and the Register of Insolvencies for six years.

Partnerships

A partnership can enter into a trust deed. This set up by an IP and is a legally binding agreement to pay back creditors over a set period of time. This can be monthly instalments, a lump sum payment, or a combination of both. There are fees to set up a partnership trust deed but these can normally be taken from any payments you make into the trust deed, instead of being taken up front.

See our fact sheet:

Partnerships.

If you are in a partnership, the partnership can include partnership debts in the trust deed. It is common for each partner to set up an individual trust deed at the same time. This is because partners are also personally liable for partnership debts.  Setting up an individual trust deed at the same time means these debts are also dealt with and creditors cannot take any further action against individual partners.

You can carry on trading if your partnership enters into a trust deed. However, it could mean that you have to sell business assets to pay the creditors. You may also find it difficult to get business banking or credit facilities. This is because the trust deed would be recorded with credit reference agencies and the Register of Insolvencies for six years.