Information for Directors
If you are a director of a limited company or a member of a limited liability partnership that is potentially insolvent, you have a number of duties, obligations and potential liabilities under the Insolvency Act 1986, the Companies Act 2006 and the Company Directors Disqualification Act 1986.
Your duties, in brief, include:
- Having regard to the financial outcome to the unsecured creditors, rather than shareholders.
- Protecting and preserving the assets of the company.
- Not entering into any transactions that could be later challenged by a Liquidator or Administrator.
- To act in good faith at all times.
The potential liabilities that directors could face include:
- Financial obligations to pay monies to the Liquidator or Administrator.
- Being reported to the Insolvency Service, who may take action to have a director disqualified from managing a company in future for between 2 and 15 years.
- In cases of deliberately misleading or fraudulent activity, directors can be liable to a fine and/or imprisonment.
- In the case of a legal action being brought which a director defends, a director may also be asked to pay some of the legal costs, if unsuccessful.
- In cases where a director has provided a personal guarantee or security for a company debt, this will likely become due in the event of Liquidation or Administration.
This area is a minefield for many directors and often claims are made against directors because of technical breaches being made without the directors realising their actions can later be challenged by a Liquidator or Administrator.
If you are concerned that your company is insolvent, please call us immediately for confidential advice as to what steps you should consider to limit any risks and liabilities.
If you have provided a personal guarantee or security for a company debt, our team has specialists that can assist you with negotiating with the creditor.