What are my responsibilities as a director of a company in administration or liquidation?
Your main responsibility will be to supply information about the company’s affairs to the insolvency practitioner or official receiver. Most of your responsibilities for managing the company will cease. You may, however, be asked to help, for example, with the sale of assets. You are under an obligation to provide all assistance reasonably requested.
If you are an employee of the company, the administrator will also advise you when your employment is terminated.
What are my liabilities as a director of an insolvent company?
Your first responsibility is to promote the success of the company, including the obligation to foster relations with customers and suppliers. If the company gets into financial difficulty, you should also ensure that the company does not continue incurring additional liabilities when there is no reasonable prospect of avoiding insolvency – you should not try to ‘trade out of difficulty’. Doing this could constitute wrongful trading if you fail, which could make you personally liable for the company’s debts. You must obtain specialist insolvency advice as soon as possible.
If there is a reasonable chance of saving the business, you will need to take the appropriate action – for example, negotiating new financing and working with your creditors to reach an amicable solution. If there is not, you should instigate the appropriate insolvency proceedings.
Be aware that these liabilities apply even if you are only a part-time or non-executive director.
Next Steps
If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising because of any person or organisation acting or refraining from acting on any information.
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