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Director Duties in Insolvency

As a director of a limited company, the Companies Act imposes a fiduciary duty in respect of any actions you undertake.

The overriding principle is that you must act in the best interests of the company, its creditors, shareholders and stakeholders at all time.

It is expected that you are to act in good faith, and you have a duty to promote the success of the company.

If your company is facing financial pressure, it is important that you seek immediate advice, and act in a responsible manner. Should your company be at risk of insolvency, taking advice at the appropriate times, together with acting accordingly can potentially protect you from any claims against you personally.

Being a director of a company that enters insolvency is not an automatic offence, but any actions carried out by you in the period of your directorship will need to be considered by the appointed Insolvency Practitioner.


What issues can Directors face during Insolvency?

Examples of where claims may arise against directors for not acting appropriately are as follows:-

  • Wrongful Trading: If you are to form the opinion that your company is at risk of insolvency, it is imperative that you obtain immediate advice. If it is considered that you knew or ought to have known that there was no reasonable prospect of your company avoiding insolvent company liquidation, then you may be held personally liable for any loss suffered by the company or creditors, as a result of you failing to act appropriately in your financial dealings.
  • Misfeasance: Often, these sorts of actions will occur in cases where the director has failed to act in good faith. Examples of such instances would be where a director has disposed of assets at an undervalued level, or has sought to prefer a particular creditor(s) over another.

Whilst these are worst-case scenario examples, it is key that you understand your responsibilities as a director.  Worse case offence can result in personal liability, or in the most severe cases, a fine or imprisonment.


Get in Touch

If your company is struggling financially, and you are unsure of the best course of action, please call our Insolvency Experts, who will be happy to assist.  We will seek to quickly obtain an understanding of your business and its issues, in order to advise on the most appropriate course of action.

Taking such advice will not only help you with dealing with your company’s affairs in the correct manner, but also mitigate any risk to you as directors, for failing to act responsibly. You can get in touch by calling 0300 303 8284 or by filling out our contact form.

Call our friendly experts on 0300 303 8284

By quickly taking back control, we can help you solve the problems that your business has.

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