There are numerous instances in which a company director can be held liable for company debts, and subsequently considered to have behaved improperly by a court of law. When a company director is pulled into a legal debate about their conduct, some of the evidence that prosecutors will look for is:
• Paying shareholders whilst the company is insolvent
• Paying creditors by means of fraudulent activity (e.g. providing misleading financial info or collecting payment for services that could not be rendered)
• Committing misfeasance. This is the process of using company funds for personal gain and activity unrelated to to the company
• Breaching terms of a personal guarantee
• Disposing the company’s assets incorrectly
What Happens When You Fail to Fulfil Directors Duties
During the insolvency process, numerous individuals and organisations will conduct investigations into a company. Liquidators, administrators and receivers will all take a good look at the affairs of a business to determine what it owes, and also to establish whether any illegal activity has taken place.
If a company director has acted unlawfully, they will be issued with an Adverse Report. This is then sent across to the Department of Business, Innovation & Skills who will conduct their own investigation. This department has the power to issue banning orders and disqualification documents – which can prevent company directors from taking executive business roles for up to fifteen years. Any outstanding debt must be paid back lawfully.
If you're finding your role as a company director a little overwhelming, contact us today to find out how we can help.