The role of Directors during Insolvent Liquidation.

What are the Directors' responsibilities when a company becomes insolvent?

If your company is insolvent, and after it enters into liquidation, as a director you have certain duties and responsibilities which you are legally required to adhere to. Not fulfilling some of these duties can result in an accusation of wrongful trading which could see you held personally liable to contribute to the company’s assets.

Once your company is insolvent it is your primary responsibility as a director to ensure you limit the losses to your creditors.  

Advice and guidance from the Liquidation Centre.

Getting professional advice about your role, responsibilities and duties as a director during company insolvency is very important. The Liquidation Centre have over 20+ years of advising directors in your position. We are dedicated to keeping the process of starting a CVL as simple as possible and will be available to offer advice, and guidance and provide progress updates every step of the way.

If you are worrying about your role as director or the company’s insolvency, then get in touch with our team of in-house liquidation experts.

What can’t a director do when responsible for an insolvent company?

When your company goes into liquidation a full investigation is carried out on the running of the company and the director’s conduct during and leading up to the liquidation process.

It is vitally important that you do not engage in any of the following activities whilst knowing that the company is insolvent as you risk being held personally responsible for contributing to the company’s assets or could even face jail time.

Engage in wrongful trading

If you continue to trade when you are insolvent and you know your company situation cannot be turned around, then you are engaging in wrongful trading.

Borrow without intent to repay

This can be fraudulent trading. If you borrow, obtain finance or take money from customers knowing you will not repay or fulfil the orders you can face up to 10 years in prison and become personally responsible for contributing to the company’s assets.

Sell off assets under market value

By selling off the company’s working and useful assets below market value or giving them away, you are considered to be knowingly and willingly reducing the amount of money available to your creditors during liquidation. If you are found to be doing this a court can force a reversal of the sale.

Favour payments of creditors

You must treat all creditors fairly. This means that you cannot make unreasonable decisions to pay certain creditors over others. If you are found to have preferred certain creditors a court can reverse these payments ordering them to repay the money back to your company.