Directors Concerns

If a company fails, its Directors' actions leading up to its failure will fall under scrutiny.

Any appointed Administrator or Liquidator is under a duty to review the events leading up to insolvency and report them to the Insolvency Service, who will then decide if disqualification proceedings are appropriate.

In addition, certain transactions that take place within a specified timeframe may be potentially recoverable or actionable, resulting in the appointed Insolvency Practitioner being obliged to pursue these for the benefit of creditors.

This means that Directors need to be extremely vigilant in terms of:

  • Justifying certain decisions that were made up to the date the business is deemed to have failed; and
  • Making sure that they do not undertake certain actions to which they could subsequently be brought to task.

What are the main considerations for a Director?

Directors Disqualification & Compensation Orders

Directors may end up disqualified as a result of their conduct. If they have caused losses to one or more creditors of an insolvent company, they may have to pay a compensatory amount to the value of the loss they have personally caused.
Wrongful Trading

This is when a company continues to incur credit while knowing that the company will be unable to satisfy its liabilities.
Transactions at an Undervalue

These are transactions that were undertaken by an insolvent company where assets were transferred or sold to a third party below their market value.
Preferences

This is when a company affords special treatment to a type of creditor, to the detriment of other creditors falling within the same group.
Misfeasance

This is where a director misapplies, misappropriates, retains or becomes accountable for a company’s property.
Illegal Dividends

This is when a shareholder receives payment in the form of a dividend when there were insufficient distributable reserves available.
Overdrawn Director Loan Accounts

This is when a company provides funds to a Director which is categorised as a loan and remains due and payable.
Government Support Schemes during the Pandemic

Government Support packages including Bounce Back and CBILS Loans were introduced to assist businesses during the Pandemic, but any deliberate misuse may have serious consequences.

Wrongful Trading, Transactions at an Undervalue, Preferences and Misfeasance are collectively known as Antecedent Transactions. There are other types of Antecedent Transactions, such as Fraudulent Trading and Extortionate Credit Agreements. However, actions falling within those categories are more rare.

6 Benefits of Using Us

SFP is an award-winning Insolvency company that provides expert assistance in Turnaround and Restructuring services.

Choosing the right practitioner from the start will have major implications on any case and here at SFP we will take the time and effort to look into your business accordingly.

Having worked with a large number of clients over the last 18 years, we pride ourselves on being a trusted partner to UK businesses who are looking to survive in what is becoming an ever-increasingly challenging business economy.

Get in touch with one of our experts and they will:

  • Listen to you in confidence about the challenges you currently face
  • Analyse your business finances to realise your current scenario
  • Help you understand available restructuring options
  • Recommend, define and agree the way forward
  • Support you through all processes as a result of your taken actions

Call us on 0203 5877700 and talk to us today.