[vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″ shape_divider_position=”bottom”][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][vc_column_text]In recent months there has been high profile corporate insolvency cases, such as Carillion, Maplin, and Toys R Us, demonstrating that economic uncertainty is still rife. But in the event of corporate insolvency, what responsibilities does the director of the company have? We’ve got the quick guide to help you understand.
It’s important for directors to act responsibly when their company become insolvent, as you can face consequences if you fail to do so. Once a company has moved into the liquidation process, directors lose the control they had over the company and the assets. When a company becomes insolvent, the aim is to safeguard the assets that the company still possesses, with the steps needing to be taken as soon as a company is insolvent.
Cease trading
This is the most important step and if a director fails to do so, they could be accused of wrongful borrowing. Failing to cease training could mean you’re no longer allowed to be a company director for a set period of time, face financial penalties, and you could even serve jail time if your wrongdoing is deemed severe. Ceasing trading means no new borrowing should be undertaken and all assets should be secured.
Inform shareholders and creditors
If the business has either or both shareholders and creditors, they need to be informed. Shareholders should be tackled first, with an agreement for a ‘winding up resolution’ that can lead to the company closing. Creditors then need to be invited to a meeting to explain the company’s financial situation. During this point, you should also appoint a liquidator for the business.
Gather paperwork
The director of a business is also responsible for delivering the essential information to the liquidator. This should include financial records, statement of affairs, and asset registers, which can then be used to gain an accurate picture of where the company stands. It’s important to note that liquidators will scrutinise these documents, including directors’ loans that will be called in. Personal guarantees and indemnities will also be called in.
Interview
As a director, you must also comply with any requests to be interviewed by the liquidator. Interviews aim to set out the roles and responsibilities of those involved in the company.
If you want to discuss corporate insolvency, whether you’re a director involved in the business or you want to understand if you can recover debt, our professional team can provide expert support.[/vc_column_text][/vc_column][/vc_row]
