When Business Debts Follow the Owner

The executor first realised the business was in trouble when three creditors called on the same morning.

One wanted payment for stock delivered before the owner died. Another was chasing overdue rent on the workshop. The third claimed the deceased had personally guaranteed a large equipment loan.

The business bank account held less than $20,000.

Employees were waiting for wages, tax returns were incomplete and several customers had paid deposits for work that had not yet been finished. The deceased’s family believed the business was worth hundreds of thousands of dollars, but that figure was based on its reputation, equipment and past turnover, not on the money available to meet immediate debts.

One beneficiary wanted the executor to keep trading until the business recovered.

Another wanted everything sold immediately.

The executor had a more urgent problem: determining which debts belonged to the deceased, which belonged to a company, and whether continuing the business would preserve value or create new liabilities.

Business debts can transform an apparently valuable New Zealand estate into a complex creditor administration. The executor must identify the legal structure, separate personal and business obligations, protect secured assets, assess solvency and avoid paying creditors in the wrong order.

The central question is not simply, “How much does the business owe?”

It is, “Who legally owes each debt, what property secures it, and what happens if there is not enough money to pay everyone?”

## Begin With the Business Structure

The legal structure determines where the debt sits.

A business may operate as:

– A sole trader
– A partnership
– A limited liability company
– A trust-owned enterprise
– A combination of several structures

The trading name displayed on the premises may not reveal the legal debtor.

An invoice might carry a familiar business name while the contract was signed by:

– The deceased personally
– A company
– Two partners
– Trustees
– The deceased as guarantor
– More than one of these parties

Before paying any creditor, identify the contracting party.

Review:

– Invoices
– Credit applications
– Loan agreements
– Leases
– Purchase orders
– Company records
– Partnership agreements
– Trust documents
– Bank accounts
– Tax registrations
– Insurance
– Personal guarantees

The same deceased person may have operated a sole-trader activity while also owning shares in a company. Those liabilities must not be blended together.

## Sole-Trader Debts Usually Enter the Estate

A sole trader and the business are not separate legal persons.

If the deceased traded personally, business debts commonly become debts of the estate.

These may include:

– Supplier accounts
– Commercial rent
– Equipment finance
– Customer refunds
– Employee obligations
– Tax
– Utilities
– Professional fees
– Contract damages
– Business credit cards
– Warranty claims

The business assets may also form part of the estate, including:

– Stock
– Tools
– Machinery
– Vehicles
– Accounts receivable
– Intellectual property
– Customer lists
– Goodwill
– Work in progress

The executor must collect the assets and assess the debts as part of the personal estate administration.

A profitable sole-trader business can still face an immediate cash shortage if money is locked in stock, unfinished work or unpaid customer invoices.

## Company Debts Normally Belong to the Company

A limited liability company is legally separate from its shareholder.

If the deceased owned all the shares in a company, the estate generally inherits the shares, not the company’s individual assets and debts.

The company remains responsible for obligations such as:

– Supplier invoices
– Employee wages
– Company tax
– Commercial leases
– Company loans
– Equipment finance
– Customer deposits
– Contract claims

The estate may own:

– Shares
– A shareholder loan owed by the company
– Declared but unpaid dividends
– Unpaid salary or director fees
– Other contractual rights

Company records must continue to reflect the correct shareholders and share allocations as changes occur. citeturn770604search2turn770604search44

Do not pay company creditors from the estate account merely because the deceased was the controlling shareholder.

That could improperly reduce the inheritance while favouring creditors of a separate legal entity.

## Personal Guarantees Can Reconnect Company Debt to the Estate

The protection of company ownership may be weakened where the deceased gave a personal guarantee.

Common guarantees include:

– Bank lending
– Commercial leases
– Supplier credit
– Vehicle finance
– Equipment loans
– Trade accounts
– Property development funding

A guarantee can allow the creditor to claim against the estate if the company does not pay.

The executor should obtain:

– Signed guarantee
– Underlying loan or contract
– Current balance
– Security documents
– Default notices
– Maximum guaranteed amount
– Evidence of company payments
– Rights of reimbursement

Do not assume the creditor can claim the entire company debt automatically.

The guarantee may be:

– Limited to a fixed amount
– Conditional
– Released
– Replaced
– Connected only with certain facilities
– Subject to defences

Equally, do not assume death cancels the guarantee.

A substantial guarantee should be entered in the estate’s contingency register even if no formal demand has yet been made.

## Partnerships Require Immediate Review

Partnership debts can be especially complicated because partners may be personally liable for business obligations.

The executor should locate:

– Partnership agreement
– Ownership percentages
– Capital accounts
– Drawings
– Bank authorities
– Business debts
– Insurance
– Buyout provisions
– Dissolution terms
– Rights of surviving partners

The death may:

– Dissolve the partnership
– Trigger a compulsory buyout
– Allow continuation by surviving partners
– Create an amount payable to the estate
– Leave the estate exposed to existing partnership liabilities

Do not allow the surviving partner to value the deceased’s interest alone.

The same person may benefit from a low business valuation while also controlling the records needed to calculate the estate’s entitlement.

Independent accounting and legal advice may be necessary.

## Trust-Owned Businesses Are Not Personal Estate Assets

A business may be operated by trustees or through a company owned by a family trust.

The deceased may have been:

– Trustee
– Beneficiary
– Settlor
– Appointor
– Employee
– Director
– Lender
– Guarantor

Trust business debts remain within the trust structure unless the deceased was personally liable.

The estate may hold a valuable loan account against the trust, but that is different from owning the trust’s business assets.

Obtain:

– Trust deed
– Trustee resolutions
– Financial statements
– Loan ledgers
– Guarantees
– Ownership records
– Trustee succession documents

Keep estate money and trust money separate.

## Freeze Assumptions, Not Necessarily the Business

The death of the owner does not always mean operations should stop instantly.

An abrupt shutdown can destroy value by:

– Losing customers
– Breaching contracts
– Spoiling stock
– Leaving jobs unfinished
– Triggering lease defaults
– Causing employees to leave
– Allowing intellectual property to disappear
– Preventing collection of receivables

However, continuing to trade can create new liabilities.

Before carrying on, assess:

– Legal authority
– Business structure
– Cash flow
– Profitability
– Existing contracts
– Employee needs
– Insurance
– Tax
– Health and safety
– Management capability
– Personal liability risk
– Sale prospects

A short period of controlled continuation may preserve an existing business.

Indefinite trading based on hope can deepen an insolvent estate.

## Establish Who Has Authority to Act

An executor’s authority over the deceased’s personal estate is formally confirmed through probate. Current Ministry of Justice guidance states that the person or organisation named as executor applies to the High Court for the grant. citeturn770604search7

That does not automatically appoint the executor as:

– Company director
– Partner
– Trustee
– Business manager
– Authorised bank signatory

Each role requires separate analysis.

For a company, review:

– Constitution
– Shareholder agreement
– Director appointment powers
– Existing directors
– Share register

For a partnership, review the partnership agreement.

For a trust, review trustee succession provisions.

The executor should not sign contracts in a role they do not legally hold.

## Build a Complete Business Debt Register

Create a schedule covering every known and potential liability.

| Creditor | Legal Debtor | Amount | Security | Status |
|—|—|—:|—|—|
| Equipment lender | Company, with estate guarantee alleged | $125,000 | Equipment and guarantee | Under review |
| Supplier | Sole-trader estate | $18,400 | Unsecured | Verified |
| Commercial landlord | Company | Unknown | Lease rights | Rent and reinstatement pending |
| Tax authority | Estate and company separately | Pending | Statutory obligations | Returns required |
| Customer deposits | Sole-trader estate | $32,000 | Unsecured claims | Jobs and refunds under review |

Useful status categories include:

– Verified
– Disputed
– Secured
– Contingent
– Unquantified
– Company liability
– Estate liability
– Joint liability
– Paid
– Settled

Do not list all business creditors as estate creditors merely because the deceased dealt with them personally.

## Verify Every Creditor Claim

A creditor should provide evidence showing:

– Correct debtor
– Contract
– Goods or services supplied
– Invoice history
– Payments credited
– Interest
– Fees
– Security
– Guarantee
– Current balance

The executor should compare the claim against:

– Accounting records
– Bank statements
– Purchase orders
– Delivery records
– Tax returns
– Emails
– Customer records
– Company accounts
– Previous settlements

A supplier’s statement may omit credits or returns.

A landlord may include repair costs that are disputed.

A lender may calculate default interest incorrectly.

Do not accept or reject a claim based only on urgency or family opinion.

## Separate Pre-Death and Post-Death Liabilities

This distinction becomes crucial if the executor continues a sole-trader business.

### Pre-death debt

Created by the deceased before death.

### Post-death administration expense

Reasonably incurred by the executor to preserve or realise the estate.

### Post-death trading liability

Created by continuing business operations after death.

New post-death obligations can create personal risk if the executor contracts without sufficient authority or fails to make clear that they act in a representative capacity.

Whenever entering a necessary arrangement, the executor should identify:

– Contracting party
– Capacity
– Source of payment
– Liability limit
– Authority
– Termination rights

Do not continue ordering stock under the deceased’s old account without confirming who will be liable.

## Collect Business Debts Owed to the Deceased

Not every business balance is money the estate owes.

The business may be owed:

– Customer invoices
– Progress payments
– Retentions
– Refunds
– Supplier credits
– Insurance proceeds
– Tax refunds
– Loans to employees or related entities

Prepare an accounts-receivable schedule showing:

– Customer
– Invoice
– Amount
– Due date
– Dispute
– Work completed
– Collection status

Customers should receive clear payment instructions from the authorised representative.

Do not allow former employees or family members to collect cash privately.

Amounts owed to a company should be paid to the company, not to the personal estate.

## Customer Deposits May Become Creditor Claims

A customer who paid in advance may be entitled to:

– Completion of the work
– Delivery of goods
– Refund
– Damages for breach

The executor should identify every deposit and ask:

– Has the work started?
– Can it be completed profitably?
– Are materials already purchased?
– Is the contract transferable?
– Does a company or the estate owe the obligation?
– What refund is legally due?
– Is the customer secured in any way?

Using new customer money to complete older jobs can deepen financial problems.

Do not accept fresh deposits unless the business has legal authority, operational capacity and a realistic plan to perform the work.

## Employee Liabilities Must Be Identified Quickly

The business may owe:

– Wages
– Holiday pay
– Reimbursements
– Redundancy entitlements
– Retirement contributions
– Expense claims
– Notice payments

The employer may be the company, partnership or deceased sole trader.

Review:

– Employment agreements
– Payroll
– Leave records
– Timesheets
– Tax deductions
– Workplace policies
– Employee benefit arrangements

Do not promise payment dates until the employer and cash position are confirmed.

If the business cannot pay employees, specialist employment and insolvency advice may be required urgently.

Employee claims may receive preferential treatment in certain insolvency circumstances, so they should not be treated as ordinary supplier invoices without checking the applicable rules.

## Tax Debts Must Be Investigated Even Without a Demand

The executor should notify Inland Revenue of the death and identify all tax accounts connected with the deceased. Current guidance states that the estate must arrange payment of outstanding debt and that notifying the authority allows deceased-person tax matters to be addressed. citeturn770604search6turn770604search21

Possible obligations include:

– Final personal income tax
– Sole-trader income
– Goods and services tax
– Employer deductions
– Provisional tax
– Fringe benefit tax
– Company tax
– Estate income tax
– Student loan or child support matters

The estate and a company are different taxpayers.

An estate earning taxable income generally needs to file an IR6 estate or trust return. citeturn770604search36

Keep separate tax calendars and reserves for:

– The deceased personally
– The estate
– Each company
– Any trust
– Any partnership

Do not distribute business sale proceeds before the tax consequences are understood.

## Review Secured Creditors First

A secured creditor may enforce against identified business property.

Security may cover:

– Vehicles
– Machinery
– Stock
– Receivables
– Land
– Company assets
– Several asset classes under broad security

For each secured debt, identify:

– Debtor
– Secured party
– Collateral
– Outstanding balance
– Priority
– Cross-collateralisation
– Default status
– Release conditions
– Enforcement rights

Do not sell secured equipment and use the proceeds for wages, suppliers or beneficiaries without addressing the security.

The lender may require direct payout from the sale proceeds.

A security interest held over company assets does not automatically extend to personal estate assets unless additional security or guarantees exist.

## Gross Asset Value Can Be Misleading

A workshop may contain equipment valued at $300,000.

That does not mean the estate has $300,000 available.

The calculation might be:

| Business Asset Position | Amount |
|—|—:|
| Equipment market value | $300,000 |
| Secured finance | ($235,000) |
| Auction, removal and sale costs | ($35,000) |
| Net equity | $30,000 |

Add employee, tax, rent and customer claims, and the business may have no remaining value.

Always calculate net realisable value rather than relying on replacement value, book value or insurance value.

## Decide Whether the Business Is Solvent

A business can fail either of two practical tests:

– It cannot pay debts as they fall due.
– Its liabilities exceed the realisable value of its assets.

The exact legal assessment depends on the entity and insolvency regime.

Prepare:

– Current bank position
– Aged receivables
– Aged payables
– Tax liabilities
– Employee obligations
– Secured lending
– Customer deposits
– Asset values
– Weekly cash-flow forecast
– Contingent claims

Do not count doubtful customer debts at full value.

Do not use historic business valuations based on profitable trading if the key owner has died and the business cannot continue in the same form.

## Insolvent Company and Insolvent Estate Are Separate Problems

A company may be insolvent while the personal estate remains solvent.

Alternatively, the estate may be insolvent even though the company continues profitably.

If a company cannot pay its debts, possible formal processes may include:

– Voluntary administration
– Receivership
– Liquidation
– Creditor compromise
– Restructuring

In voluntary administration, an independent administrator investigates the company’s affairs and considers whether creditors may receive a better return than through immediate liquidation. citeturn770604search10turn770604search39

The executor, acting only as shareholder representative, should not seize company money or prefer the estate over other company creditors.

Obtain company-insolvency advice from appropriately qualified professionals.

## Payment Priority Matters in an Insolvent Estate

Where the deceased’s personal estate cannot pay its debts, funeral expenses and administration expenses in full, the executor cannot simply pay creditors in the order they call.

The Administration Act permits the estate to be applied according to the priorities that would apply under the insolvent deceased-estate regime. citeturn770604search9turn770604search0

The exact order can depend on matters such as:

– Secured claims
– Administration costs
– Funeral expenses
– Preferential claims
– Employee entitlements
– Taxes or statutory claims
– Ordinary unsecured debts
– Deferred or subordinated claims

The executor should obtain specialist advice before making payments when insolvency is possible.

A payment to the wrong creditor may prejudice a higher-ranking claimant and expose the executor personally.

## Do Not Pay the Most Aggressive Supplier First

A creditor may threaten to:

– Remove equipment
– Contact beneficiaries
– Publicise the debt
– Begin proceedings
– Stop supplying an operating business
– Charge further interest

Pressure does not determine legal priority.

The executor can respond:

> The claim has been recorded and is being reviewed with the estate’s other liabilities. The executor cannot make a payment that would improperly prefer one creditor or prejudice secured and higher-ranking claims.

Where continued supply is essential to preserve business value, a new post-death agreement may be negotiated separately.

Do not quietly pay an old debt as the price of receiving new goods without understanding the legal effect.

## Negotiating With Creditors

Negotiation can preserve estate value where the alternative is expensive enforcement.

Possible proposals include:

– Short standstill
– Reduced lump-sum settlement
– Instalment arrangement
– Interest freeze
– Return of financed equipment
– Sale of secured property
– Mutual release
– Continuation of essential supply on cash terms
– Assignment of receivables
– Compromise of disputed charges

A settlement should state:

– Original claim
– Agreed amount
– Payment date
– Treatment of interest and costs
– Security release
– Full and final settlement
– Parties released
– Consequences of non-payment
– Executor’s representative capacity

Do not make personal promises to pay if estate funds prove insufficient.

## Negotiate From Evidence, Not Desperation

Before approaching a creditor, know:

– Realisable asset value
– Security
– Competing claims
– Likely insolvency outcome
– Cost of enforcement
– Business-sale prospects
– Available cash
– Creditor’s legal position

A creditor may accept a lower immediate settlement where formal insolvency would produce less.

The executor should not misrepresent the estate’s finances.

Provide enough reliable information to support the proposal while protecting confidential material and privileged advice.

## Deal With Commercial Leases Early

A lease can create major business liabilities through:

– Rent
– Outgoings
– Repairs
– Reinstatement
– Make-good obligations
– Personal guarantees
– Assignment restrictions
– Long remaining terms

Obtain the complete lease and any guarantee.

Ask:

– Can the lease be assigned?
– Can it be surrendered?
– Does death trigger any provision?
– Is the tenant the deceased or a company?
– What arrears exist?
– What reinstatement work is required?
– Can equipment remain temporarily?
– Is the landlord willing to negotiate?

Do not abandon premises without documenting stock, equipment and security.

Equally, do not continue paying high rent for months without a business sale or closure plan.

## Equipment Finance and Leases Need Separate Treatment

Business equipment may be:

– Owned outright
– Financed
– Leased
– Hired
– Subject to retention-of-title terms
– Borrowed
– Owned by a company or trust

Record every material item and connect it with its contract.

A machine physically located at the premises may not belong to the business.

Before selling it, confirm:

– Ownership
– Payout
– Security
– Lessor consent
– Removal costs
– Market value
– Personal guarantee

Selling another person’s equipment can create serious liability.

## Review Retention-of-Title Claims

A supplier may claim ownership of unpaid stock until the invoice is paid.

The executor should request:

– Supply agreement
– Terms accepted
– Invoice
– Goods identified
– Security registration where relevant
– Evidence the stock remains in possession
– Payment history

Do not automatically return all stock bearing the supplier’s label.

The supplier must establish its legal rights.

Do not sell disputed stock until the claim is reviewed.

## Ongoing Contracts Can Produce Hidden Debts

Business obligations may continue under:

– Software licences
– Equipment maintenance
– Advertising
– Telecommunications
– Vehicle leases
– Waste collection
– Security monitoring
– Franchise arrangements
– Professional subscriptions
– Supply contracts

Create a contract schedule showing:

– Party
– Term
– Renewal date
– Cancellation right
– Death provision
– Personal guarantee
– Outstanding amount
– Business importance

Cancelling a service may create an exit fee.

Failing to cancel may allow charges to continue.

Do not close the business bank account before identifying all recurring obligations and refunds.

## Insurance Can Reduce Business Debt Exposure

Search for policies covering:

– Key-person loss
– Loan repayment
– Business interruption
– Trade credit
– Life insurance assigned to lenders
– Professional liability
– Property damage
– Cyber incidents
– Employee claims

A policy may pay:

– The company
– The estate
– A lender
– Another policy owner

Do not assume that insurance proceeds belong to the estate.

Notify the insurer promptly and preserve documents needed for claims.

A debt should not be repaid from estate funds before checking whether insurance is intended to meet it.

## Avoid Mixing Company and Estate Accounts

All business receipts and payments must go through the account of the correct legal entity.

Do not:

– Deposit company customer payments into the estate account
– Pay personal estate creditors from company funds
– Use estate money to pay company suppliers without documentation
– Use personal money as an unrecorded business advance
– Treat company tax refunds as estate assets

If the estate advances funds to a company to preserve its value, document:

– Amount
– Authority
– Purpose
– Repayment terms
– Security
– Risk
– Approval

An undocumented cash injection can disappear into an insolvent company while reducing the beneficiaries’ estate.

## Continuing a Sole-Trader Business Creates Special Risk

Where the business belonged personally to the deceased, the executor may consider completing existing work or selling it as a going concern.

Before doing so, confirm:

– Will powers
– Probate position
– Insurance
– Employee arrangements
– Tax registration
– Health and safety
– Customer contracts
– Supplier terms
– Cash flow
– Personal liability protection

The executor should avoid taking new speculative work solely to restore profitability.

A controlled wind-down is different from launching a fresh trading strategy with estate assets.

Record the date on which the executor decides to:

– Continue temporarily
– Sell
– Close
– Complete selected contracts
– Stop accepting new work

## Protect Customer and Employee Data

Business records may contain personal information about:

– Customers
– Employees
– Contractors
– Suppliers
– Patients or clients
– Members

The executor should restrict access and preserve only what is needed for administration, legal compliance, sale or closure.

Do not give beneficiaries unrestricted access to customer databases merely because the deceased owned the business.

When selling the business, consider whether personal information can lawfully be transferred and what notice or contractual arrangements are required.

## Creditor Claims Can Be Partly Accepted

A claim may contain valid and invalid components.

For example, a landlord may claim:

– $12,000 unpaid rent
– $6,000 lawful outgoings
– $20,000 disputed reinstatement
– $3,000 unsupported legal costs

The executor can accept the verified portion while disputing the rest.

State clearly:

> The estate accepts liability for the rent and verified outgoings. The reinstatement and legal-cost components remain disputed pending supporting evidence and review of the lease.

Narrowing the dispute can reduce legal expense and make settlement more realistic.

## Court Proceedings Require Immediate Attention

A business creditor may issue proceedings against:

– The estate
– The company
– A surviving partner
– A guarantor
– Several parties together

When court documents arrive:

– Record the service date.
– Preserve the envelope and documents.
– Identify the named defendant.
– Note response deadlines.
– Notify co-executors and directors.
– Stop prejudicial distributions.
– Obtain legal advice.
– Secure relevant business records.

Do not respond in the deceased’s name as though they were alive.

The correct legal representative or entity must deal with the proceeding.

## Executors Are Not Automatically Personally Liable

Accepting the executor role does not normally make the deceased’s business debts personal debts of the executor.

Personal exposure may arise if the executor:

– Continues trading recklessly
– Enters contracts personally
– Misrepresents authority
– Pays creditors in the wrong order
– Distributes estate assets prematurely
– Misuses secured property
– Mixes funds
– Prefers themselves or related parties
– Fails to preserve business assets
– Ignores known tax or employee obligations

Sign documents in the correct representative capacity.

Do not say, “I promise I will personally make sure this is paid,” unless that is genuinely intended and independently advised.

## Beneficiaries May Receive Nothing From the Business

A will may leave “my business” to a child.

That gift is subject to the actual legal and financial position.

The beneficiary may receive:

– Business assets
– Shares
– Sale proceeds
– A net partnership interest
– Goodwill
– Nothing, if liabilities consume the value

A beneficiary does not ordinarily receive the valuable assets while leaving the debts behind for everyone else.

The executor must complete the solvency and ownership analysis before describing the business as an inheritance.

## Communicate Without Creating Panic

Beneficiaries should understand when business debts affect the estate.

A useful update might state:

> The executor is reviewing supplier debts, tax obligations, equipment finance and a personal guarantee connected with the business. The gross asset value does not yet represent the business’s net value. No distribution can be calculated until the secured and contingent liabilities are confirmed.

Avoid saying:

> The business is bankrupt.

unless a proper assessment or formal process supports that statement.

Premature conclusions can damage sale negotiations, employee confidence and creditor relations.

## The Business Debt Action Plan

### First week

– Secure premises, records, cash and online systems.
– Identify the legal business structure.
– Notify insurers and essential advisers.
– Stop unauthorised transactions.
– Preserve payroll, tax and customer records.
– Prepare an urgent cash-flow forecast.

### First month

– Build the creditor register.
– Confirm secured debts and guarantees.
– Separate company, partnership, trust and personal liabilities.
– Identify employee and customer obligations.
– Obtain asset valuations.
– Review leases, finance and recurring contracts.
– Notify tax authorities.

### Solvency assessment

– Use realisable asset values.
– Include tax, employees and contingent claims.
– Check personal guarantees.
– Identify doubtful receivables.
– Separate company insolvency from estate insolvency.
– Stop beneficiary distributions if insufficiency is possible.

### Creditor management

– Verify every claim.
– Apply correct priority rules.
– Negotiate standstills and settlements where sensible.
– Obtain written releases.
– Do not prefer aggressive creditors.
– Seek specialist advice before paying from an insolvent estate.

### Closure or sale

– Decide whether to continue, sell or wind down.
– Protect customers and employees.
– Discharge secured assets properly.
– Terminate contracts methodically.
– Collect receivables.
– Preserve tax and accounting records.
– Reconcile every payment in the final estate accounts.

A business can look valuable because it has customers, equipment, employees and a recognised name.

Creditors see a different picture.

They see security, unpaid invoices, lease obligations, tax, guarantees and contractual rights.

The executor’s task is to bring those pictures together. Only after the legal debtor, asset ownership, creditor ranking and realisable value are known can the business be described honestly as an inheritance, a sale opportunity or an insolvency problem.

## Frequently Asked Questions

### 1. Are all of the deceased owner’s business debts payable by the estate?

No. Sole-trader debts generally form part of the personal estate, but company, trust and some partnership debts belong to their respective legal structures. Personal guarantees and joint liabilities can still create estate exposure.

### 2. Does owning company shares make the estate responsible for company debts?

Not automatically. A company is separate from its shareholders. The estate may be exposed where the deceased gave guarantees, provided security or had another personal liability.

### 3. Can an executor continue operating the deceased’s business?

Possibly, where the executor has authority and continuation is prudent. Cash flow, insurance, employees, contracts, tax and personal liability risks should be assessed before new trading obligations are accepted.

### 4. Which business creditors should be paid first?

The answer depends on security, statutory priority, administration costs and whether the estate or company is insolvent. An executor should obtain specialist advice rather than paying creditors in the order they demand payment.

### 5. Can creditors negotiate a reduced settlement with the estate?

Yes. A creditor may accept a reduced lump sum, instalments, returned equipment or another compromise. The agreement should be written, authorised and include an appropriate release.

### 6. What happens if business debts exceed the estate’s assets?

The estate may be insolvent. Beneficiary payments should stop, assets and securities should be verified, and debts must be handled under the applicable priority rules. Beneficiaries may receive nothing.

### 7. Is an executor personally responsible for business debts?

Not merely because they are executor. Personal exposure can arise through unauthorised or reckless trading, personal promises, incorrect creditor payments, fund mixing or premature distribution.

### 8. When should an executor involve an insolvency lawyer or accountant?

Specialist advice should be obtained where debts may exceed assets, guarantees are material, employees or secured creditors are involved, a company cannot pay debts, formal proceedings are threatened or continuing the business could create new liabilities.