What are directors’ duties when facing insolvency?

When insolvency is likely, directors’ duties shift from prioritising shareholders to acting in the best interests of creditors. This duty requires directors to preserve company assets, avoid reckless decision-making, and ensure that creditors are not unfairly disadvantaged. Directors must maintain accurate financial records, cease incurring unnecessary debts, and seek professional advice quickly. Failing to do so may lead to accusations of wrongful trading, fraudulent trading, or misfeasance. Courts judge directors against the standard of what a reasonable, diligent person with similar knowledge and experience would have done. In practice, this means documenting decisions, showing that all options were considered, and proving that creditors’ interests were central. If directors breach these duties, they may face personal liability for losses, disqualification from serving as directors, and reputational damage. Seeking timely advice and taking transparent action are the best ways to fulfill these legal obligations.