There are strict rules governing the duties and responsibilities of directors when a company is insolvent.
But do you know what they are?
The Insolvency Service has reported that investigations into the alleged misconduct of directors of insolvent companies increased by 36% year-on-year last year.
The number of cases referred to the Insolvency Service compliance and targeting department jumped from an average of 528 per month to 1,077 in the same period.
This is not solely down to Covid-related fraud.
The service has reported that of the total 932 director disqualifications in 2022-23 – 459 were cases involving COVID-19 financial support scheme abuse.
In a Supreme Court ruling last year it was stated that “directors’ duties to creditors are triggered only when a company is either insolvent or on the brink of bankruptcy,”
It also said:
Directors must consider the interests of creditors when:
1. The company is insolvent on a balance sheet basis or is unable to pay debts as and when they fall due and therefore insolvent on a cashflow basis
2. The company is bordering on insolvency
3. Insolvent liquidation or administration is probable
You can read the K2 Guide to Directors’ Duties for free here.
After that, why not talk over your situation with a restructuring adviser?
K2 Partners is here for you and happy to have an initial chat to understanding the issues involved in the next steps you may need to take.