A directors responsibilities are to the company, its shareholders and to its creditors. They must act fairly in the interests of these at all times. However, if a company becomes or may become insolvent then the directors responsibilities change.
Directors key responsibilities when insolvent:
- Act in the best interest of creditors generally
- Resignation is not an option
- Do not take further credit
- Pay cash on delivery
- Treat all creditors equally
- Do not pay one creditor in preference to another
- Do not sell or dispose of assets at an undervalue
- Preserve the company’s Books and Records
- Seek professional advice
- Preserve the company’s bank account
- Do not repay your loans
These are just a few examples of the key issues and there are many more things to consider.
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