Directors under attack
The implications of company insolvency on directors can be significant and the decisions you take can have adverse and potentially far-reaching consequences – as a director, you could be personally liable for your company’s debts.
Around 90% of companies in the UK have less than 10 employees; the majority of these are family businesses. Pressures on management time can mean that directors of these small and medium sized companies do not do all the things they should, make mistakes, or cause the company to do things that, in retrospect, ought not to have been done.
Mistakes tend to be exposed if the company goes into administration or liquidation, leaving directors prone to attack by the authorities, by the liquidator or administrator, by creditors, and by regulatory bodies.
The moment your company becomes insolvent (see Helping businesses in trouble), you have a duty to secure the best outcome for your creditors, though you must not ignore the interests of other stakeholders such as employees and customers. Additional obligations arise which can leave directors open to personal risk and liability.
Even individuals not formally appointed as a director may be treated as a director under the Companies Act or the law relating to insolvency of companies. The Insolvency Service routinely targets “de facto” and “shadow” directors.
We can help you protect against personal liability. We advise companies and directors at each of the three key stages:
- during the company’s lifetime – to prevent errors and to guard against personal liability
- when a company gets into financial difficulty
- when directors are under investigation by the authorities or administrator/liquidator
For more information on directors under attack and to start a conversation on how we can help you please contact Andrew Frake, Associate, Dispute Resolution.