At Parker Andrews, we specialise in providing comprehensive, clear and practical advice to ensure Directors are able to afford themselves maximum protection and meet all of their legal obligations. We know that this area can be littered with confusion and is potentially a legal minefield, which is why we will be by your side to support you if your business goes through a formal or informal procedure.
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 seek 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, a director may also be asked to pay some or all of the associated legal costs
- 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
- 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
This is a complicated area 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.