We have substantial experience in advising directors, either in their own capacity or as part of the board, in their duties and obligations when the company is subject to pressure. We have advised sole director/shareholder companies, SME boards and large companies on these responsibilities and assisted them to enable companies to survive and thrive.
We have also assisted directors of companies that will, or have entered, insolvency. Responsibilities do not stop with the company entering insolvency; directors are required to co-operate with the process, and in certain circumstances may face claims from the company or be subject to disqualification proceedings.
I think my company may be in trouble – what should I do?
Company directors are subject to a wide range of duties in performing their role.
If a company goes into administration or liquidation, the directors can face various claims relating to their conduct if the court finds they have been misfeasant, or are guilty of wrongful trading or fraudulent trading. Directors can end up being disqualified from acting as directors for up to 15 years.
If the company is or may be insolvent, a director’s overriding duty is to act in the interests of creditors.
A company is insolvent if it is unable to pay its debts as they fall due, or if the value of liabilities on the balance sheet exceeds its assets. Companies are often technically insolvent at various stages of the trading cycle.
Directors should always monitor the company’s financial performance. For example:
- If the company is unable to make payments when contractually due to its suppliers, or unable to pay rent or its tax liabilities when they fall due, this may be evidence of cashflow insolvency.
- If a major customer goes insolvent, bad debtors may increase and this may be evidence of balance sheet insolvency.
If the directors consider that the company is or may be insolvent, it is imperative to protect themselves from risks that they seek professional advice. We can assist with implementing turnaround strategies or placing the company into an appropriate insolvency process.
A company of mine has entered liquidation – what could happen?
We have advised numerous directors of their obligations and the potential pitfalls they face if their company has entered liquidation. For example:
- If you have a business or company with a similar name to the company that has gone into liquidation, you may not be able to continue to use it without a court order.
- If you had an outstanding directors’ loan account or recently paid dividends, you are likely to need to negotiate terms of repayment which may impact on your tax position.
- You are required to co-operate with a liquidator. We can assist you with complying with those duties.
- If the company owed sums to HMRC, you may face personal liability for some or all of these sums.