Director disqualifications
The recent case of the MG Rover directors who have now been disqualified from acting as directors is an interesting case but actually has wider implications for company directors whose companies are in financial trouble.
The present economic climate has surprisingly seen a lack of the anticipated avalanche of insolvencies within businesses in the UK. This has been as a result of banks not pressing struggling business as they would normally have done and also the previous Governments’ policy of taking things gently and providing companies with Time To Pay arrangements.
The new Government approach seems to be tougher and there are signs now that banks are starting to foreclose on loans. The question is whether there has been an artificial situation which has stopped a greater number of insolvencies but the companies have continued on trading in an insolvent position which can create personal liabilities for directors and lead to disqualification proceedings being taken against the directors after the business has failed.
It is essential that anyone concerned at the state of their business finances, who have any worries about cash flow or solvency should speak with either their accountant and take legal advice so they can be sure as to their own position. It’s quite often the case that directors can innocently stumble into trading whilst insolvent but this can have serious consequences.
By commercial litigation solicitor, Jonathan Chadwick