Insolvency issues for directors
09 December 2020
All directors owe duties to their companies. When a company is solvent, those duties are paramount but once insolvency is pending, directors must act in the creditors best interests. That difference means that the nature of the directors’ duties undergoes a significant shift when insolvency threatens.
Our note comments on the most common risks faced by directors once a company reaches the brink of insolvency. Some of these pitfalls arise out of statute. Others are derived from the common law. In either case, those operating with the benefit of limited liability can find themselves exposed personally. With timely action these risks can be minimised, in part through sound decision making but also through good, regular record-keeping and defensible reasoning. See our note for more details.
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