Directors of a company facing insolvency are often concerned that they may face directors disqualification as a result. In reality, directors disqualification proceedings are rare and in fact, recognising the company’s financial position and taking appropriate steps to commence insolvency proceedings or taking professional advice are often a sign that directors are acting in accordance with their director responsibilities and duties.
It is a Liquidator’s job to report on directors’ conduct to Department of Business Energy and Industrial Strategy (DBEIS). If DBEIS decide, having reviewed the Liquidator’s report, that there is evidence of breach of duty, they may decide to instigate proceedings and further investigation. These investigations are likely to focus on:
LIST (JIEB clock)
- Dissipation of assets for less than market value
- Concealment of assets
- Misconduct / abuse of factoring agreements
- Misuse of customer deposits
- Dishonoured cheques
- Delaying tactics
- Non-payment of Crown Debts
- Loans to Directors
- Preferential treatment of creditors
- Over-valuation of assets in accounts / financial documents
- Personal benefits received by Directors
- Phoenix operations
- Cases leading to criminal convictions
- The adequacy of Company records
- Professional advice sought
If a director is found to have breached their duties they could find themselves facing financial penalties, disqualification or imprisonment. They may require some expert free director debt advice, contact us here or call us on 08000 724 558.
Do’s and Don’ts
Do
- Hold regular board / management meetings. If you are a sole Director, keep a record of the decisions you have made
- Ensure financial records are kept up to date – make use of forward looking cash flow forecasts / management accounts
- Repay creditors in the ordinary course of business in a fair and equal manner
- Seek valuations / professional advice prior to disposing of assets
- Consider the future – could your Company survive if a major customer became insolvent (have you considered insurance to cover this)
- Ensure that assets are sufficiently insured
- Keep customer deposits in a separate account
- Set milestones for obtaining additional funding where required
- Proactively manage Debtors lists – problem payers can be identified
- Consider shortening customer credit terms
- Meet with your accountant and turnaround specialists where necessary
- Be realistic
Don’t
- Resign – this will not prevent investigation into your conduct / make the problem go away
- Ignore financial issues / bury your head in the sand
- Ignore legal paperwork – this could be a statutory demand or a winding-up petition
- Make payment promises you cannot keep
- Sell or transfer assets at an undervalue
- Neglect payments to HM Revenue & Customs in preference to other creditors
Contact us on 08000 724 558 now for free directors debt advice and support from one of our team.
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