Directors

If your company is facing insolvency your role as a director changes

Directors responsibilities icon

Your role as a Director changes and you become much more responsible for considering the impact of what you do on your creditors.

There may also be concern for you about how the insolvency of your business will impact you personally.

The sooner you take advice the more control you will have in respect of your personal position.

Key considerations:

  • As a director, am I also an employee?
  • Am I responsible for the company’s debts?
  • I have given a personal guarantee for some of the debt. What does that mean?

Further information for Directors

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    Personal Guarantees

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    Director Responsibilities During Insolvency

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    Director as Employee

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Testimonials

Directors we have recently helped

  • After approximately 20 years of trading my wife and I, as the two directors of our limited company, decided to retire and go for voluntary liquidation. Throughout the liquidation process Janet and her team maintained excellent communications and put our mind in peace.  We are extremely pleased with the service we received and would highly recommend DMC

    ~ Mohammad, ALF Ltd

  • We found at every juncture DMC gave us honest and frank advice and help in providing a solution that addressed our specific situation. Once we embarked on our journey with DMC, they held our hand and protected us the whole way through the process. I would not hesitate in recommending DMC and they should be your “first to go to” in todays current climate

    ~ Chris, V Limited

  • May I thank you and Andrew for the excellent and efficient service. We are very pleased with how smoothly it all went under tight deadlines.

    ~ Director, E Limited

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Frequently Asked Questions

The second question is the easy one. They are disqualified from being a company director. Usually for a limited period of time of 2 to 15 years.

Why they are disqualified is more difficult. A director of a limited company can be disqualified if, during their term of office, a liquidator establishes sufficient evidence of ‘unfit’ conduct which leads to a prosecution by the Disqualification Unit of the Insolvency Service. The liquidator is required, in ALL cases to submit a report. Matters to be reported on include:

  • Whether the company maintained adequate accounting records
  • Whether tax payments were kept up to date
  • Whether the director benefitted unfairly from the trading of the company.

Fraudulent trading refers to running a company with intent to defraud creditors. A liquidator can sue any person who is responsible for fraudulent trading. It is also a criminal offence.

A transaction at undervalue refers to companies or individuals making a gift or entering into a transaction where an asset is given or sold at a value less than the true market value in the period leading up to the insolvency.  Transactions at undervalue can be challenged by a liquidator or a trustee in bankruptcy.

When the directors of a company know or should know that it has no reasonable prospect of avoiding insolvent liquidation, they must take all reasonable steps to avoid losses to creditors.  A liquidator can sue them if they fail to do this.  A typical example of wrongful trading is where the directors trade on for too long and cause additional losses for the creditors. 

You will only be liable for the company debt if the company is insolvent and you have given personal guarantees to the creditors. However, you also need to consider if you owe money to the company as a director’s loan.