Insolvency issues for directors
09 December 2020
All directors owe duties to their companies. However, once a director knows or should know the company is (or is likely to become) insolvent, creditors' interests become paramount. In practical terms, this means that the nature of directors’ duties undergoes a significant shift when insolvency threatens.
Our note comments on the most common risks faced by directors once a company reaches the brink of insolvency. Some of these pitfalls arise out of statute. Others are derived from the common law. In either case, those operating with the benefit of limited liability can find themselves exposed personally. With timely action these risks can be minimised, in part through sound decision making but also through good, regular record-keeping and defensible reasoning. See our note for more details.
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