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You were a director of the company? Then read this about directors' liabilities:-
A director is under an ongoing duty to monitor the company's financial state of health and to take appropriate action and/or advice as necessary.
Should the company not pull through, the director's conduct during the period prior to liquidation will face careful scrutiny by the Official Receiver or liquidator.
If he feels that at some time prior to the winding-up, a director ought to have concluded that there was no reasonable prospect of avoiding liquidation and continue to trade (wrongful trading), the directors may be ordered by the Court to accept personal liability to contribute towards the company's debts.
If, during liquidation, it appears that there was an intent to defraud creditors (fraudulent trading), the liquidator may again seek to have the directors made personally liable for company debts.
In addition, a director may also be personally liable for the company's debts if involved in the management of a company with the same or a similar name to one which had gone into liquidation whilst insolvent within the previous five years.
As well as being judged to be personally liable under insolvency law, other laws such as conspiracy may be used by creative lawyers for creditors to render directors personally liable.
Furthermore, a director should not overlook any binding promises or contractual warranties , undertakings, guarantees or the like, which have been made on a personal basis to others about the state of the business or as to the future company actions and repayment of debts by the company. Personal commitments such as these should only be entered into after taking advice on their terms especially when the business is going through hard times.
At difficult times, a director should ensure also that all decision-making processes are properly recorded so as to avoid inappropriate inferences being drawn at a later stage and to demonstrate that he did all he could at the relevant time to minimise loss to creditors. |
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