What are director's duties?
As a director of a Company you have various duties which are determined by statute, common law and the constitution of the company. If faced with the insolvency of the company these duties become more onerous as your actions and conduct will be scrutinised by an insolvency practitioner acting as liquidator or administrator. The consequence of breaching your duties can in some cases result in personal liability for debts incurred and disqualification from acting as a director for a period of up to 15 years.
Possible actions by a liquidator or administrator include the following:
- Wrongful trading
- is an action by the liquidator or administrator against a director or former director, where they were aware, or should have known, there was no reasonable prospect of the company avoiding insolvency and they did not take every step to minimise the potential loss to company creditors.
- Fraudulent trading
- when it appears that a person has continued to trade the company with the intent to defraud creditors and can be held personally labile to contribute to the company's assets.
- where a company is in liquidation or administration and it appears that a person acting as a director of the company, or in the promotion, formation and management of a company has misapplied, retained or become accountable for assets of the company or been guilty of misfeasance or breach of fiduciary or other duties to the company. The liquidator or administrator or shareholder can recover money or damages from those found to be responsible.
When to consider directors' duties
To mitigate your exposure, if you have any concerns about your actions or obligations, you should seek professional advice immediately, ensuring you document your decision-making process to evidence that all steps were taken to protect the company's creditors.
At mlm Solutions we will work with you to identify and, where possible, resolve any issues. If a breach has taken place we can work with your existing, or our preferred, professional advisors to consider your options and support you through the process.
Speak to a solicitor about directors' duties in Glasgow, Edinburgh & London
We understand that facing up to financial challenges can be extremely difficult and stressful. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation.
For further information on directors' fiduciary duties for your company, contact us today at an office near you.