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Thursday, 6 June 2013

Directors duties in insolvent companies

In law, if a company is insolvent then the directors have a duty to act in the best interest of the creditors and not  the shareholders.  As such, the first thing to establish is whether the company is insolvent.  We have an online insolvency test to help you establish this.   If your business is insolvent then you must act to ensure that you do not make the creditors situation worse.  So if you are in a hole with tax arrears, piling up debts to trade creditors then stop digging and take advice!

Some directors are guilty of wilfully piling up debt with no hope of paying back creditors and by doing this they are risking an action for wrongful trading that can lead to disqualification and personal liability for the company's debts.

Please read our page on duties of directors of insolvent companies to help you understand your position and your options.

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