What happens to directors during liquidation?

When a company enters liquidation, directors lose control of the business and their powers cease, transferring instead to the appointed liquidator. In insolvent liquidations such as CVL or compulsory liquidation, the liquidator has a duty to investigate directors’ conduct in the period leading up to insolvency. This includes reviewing financial records, transactions, and whether directors continued trading when insolvency was foreseeable. If misconduct is identified, directors could face disqualification from acting as directors for up to 15 years or even personal liability for company debts. In a solvent liquidation (MVL), directors face far less scrutiny because the company can pay all its debts. Directors may also have to deal with overdrawn loan accounts, which liquidators will seek to recover for the benefit of creditors. Overall, while liquidation ends directors’ involvement with the company, their actions before the process are subject to review to ensure creditors’ interests were not harmed.