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As the director of a company you are expected to undertake certain duties and it is important that you uphold your responsibilities even if your company is facing insolvency. Not doing so could potentially cause you to be held personally liable for the losses caused and even lead to disqualification. Our experienced team of Insolvency and business recovery solicitors can help if you need advice as the director of a failing or insolvent business.
If you would like to know more about your legal obligations as a company director, and how Stephensons can help if your business is distressed or operating in insolvency, call us today on 01616 966 229.
The general duties of a director are set out in the Companies Act 2006. The duties that you owe to the business include:
If your company becomes insolvent or is uncertain of insolvency the interests of your creditors must be considered and you are not free to take action which puts the creditors at risk of not being paid. The interests of the creditors must be considered as paramount rather than being given equal consideration alongside those of the shareholders.
When a company is solvent it is up to the shareholders of the business to approve in advance or approve retrospectively the actions taken by the director.
However, if your company becomes insolvent and enters into liquidation your actions as a director may be subject to investigation by the liquidator. Liquidators have the power to bring claims for fraudulent or wrongful trading and you could potentially be held personally liable for the loss caused.
Since October 2015 it has been possible for liquidators to assign a right of action regarding claims for fraudulent trading, wrongful trading, transactions at an undervalue, preferences and extortionate credit transactions. Therefore, whilst liquidators may not have funds to pursue any such action there a number of third parties who specialise in acquiring these actions and have the funds to pursue them.
There are a variety of claims that could be made against you including:
People who have not been formally appointed as a director may also be held liable. Shadow directors are defined in the Insolvency Act 1986 as ‘a person in accordance with whose directions or instructions the directors of the company are accustomed to act’.
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