As a director, you have an obligation to act in the best interests of the company, and its Shareholders, and where a company is insolvent (or potentially insolvent) the primary purpose should be to achieve the best return for creditors’ and shareholders’. It might be advisable for you to consider the following recommendations.
Maintaining Good records
Maintain accurate financial information, books and records, including minutes of meetings where the company’s position was discussed.
Do not fob off your creditors
Keep in touch with your creditors. Don’t fob them off with promises of payment which the company cannot make. Treat them fairly and be straight. This will show that your doing your best to be honest and minimise their losses.
Do not sell company assets off cheap
If assets are sold, make sure you can show they were sold at fair market value. It’s sensible to obtain independent valuations, prior to any sale, and to keep these records.
Do not continue to take deposits if the company cannot supply the goods/services
Do not continue to trade, take deposits for goods or services which may not be provided, or incur additional credit, unless you reasonably believe that the company will ‘trade out’. If you do continue to trade, document your decision, and how the conclusion was reached. It is always advisable to take advice from a licensed Insolvency Practitioner.
Do not invest your own money in an attempt to avoid failure
Do not invest your own money, in an attempt to save it from failure, without seeking advice beforehand. There is no obligation for you to do so and very often, when a company goes under, directors’ may find they are left out of pocket, potentially suffering financial hardship as a result.
Please note: This guide is intended to provide basic information only. Where specific advice is required, we recommend you seek professional advice from a licensed Insolvency Practitioner, or other suitably qualified person.
Careful consideration must be given to all options available to a financially distressed business. For more advice, fill out our Contact Form and we will be in touch. Alternatively, call our FREE ADVICE LINE on 03339999689.