Advice to the Board
Company directors are responsible for the day to day running of a company’s business. In the event a business is insolvent, or may become insolvent, a director’s statutory and regulatory responsibilities change to focus on protecting creditors and potential creditors.
A company is deemed to be insolvent if it cannot pay its debts as and when they fall due, or if the value of the company’s assets is less than the value of its liabilities, taking into account its contingent and prospective liabilities. A company can also be found to be insolvent if it has an unsatisfied judgement or statutory demand.
The implication for directors is serious; decisions they take can have adverse and potentially far-reaching consequences. In the worst case this could result in the directors being held personally liable for the company’s debts.
The common activities that directors can be found liable for are fraudulent trading, wrongful trading, misfeasance, preferences, transactions at an undervalue, capital issues and misleading the market. Cork Gully can advise directors, on the appropriate course of action to ensure they meet their statutory responsibilities and avoid these potential pitfalls.
It’s important to note that even individuals who aren’t formally appointed directors may fall foul of these provisions if they are deemed to be a “shadow director” or a “de-facto” director.