During the twilight period directors are potentially at risk of incurring personal liability through the provisions of the Insolvency act 1986. This, together with the general fiduciary duties directors owe to a company, is usually the catalyst for the directors to make the decision to place the company into Creditors Voluntary Liquidation.
Directors are urged to seek advice quickly to determine the best course of action for them. If a liquidation is considered the most appropriate way forward we will assist in every way possible to ensure the directors are aware of their responsibilities, understand the implications and timing of the liquidation, and guide them through the legislation to ensure it is conducted in the interests of all parties.
Maximising the value of the company’s assets and distributing the cash to creditors is a complex area. Our specialists in insolvency and corporate recovery have extensive experience to achieve the right results.
For more information or to arrange your initial FREE consultation please telephone Mark Botwood on (01902) 393007.
How does the liquidation affect a secured creditor?
If you hold a mortgage, charge or other form of security properly registered at Companies House then you enjoy secured status during the liquidation. This enables you to take hold and realise those assets secured by way of fixed charge, subject to the conditions of your security document. If after realising those assets your indebtedness is not paid in full or if you do not hold a fixed charge then you have the right to payment out of assets you have secured by way of floating charge subject to prior payment of the preferential creditors and certain liquidation costs and expenses. If any balance remains then you have a right to claim as an unsecured creditor.
Can I reclaim my goods under retention of title?
Yes provided your retention of title clause is valid. The liquidator has a duty to realise the company’s assets for the benefit of the general body of creditors and therefore will not allow you to remove goods supplied until he is satisfied that your claim is valid. The liqudiator will ask you to supply contractual evidence of your retention of title.
I’m an unsecured creditor. Where do I stand?
As an unsecured creditor you have a right to submit a proof of debt to claim for your indebtedness together with interest up to the date of liquidation provided you have a contractual right or have given appropriate notice. The liquidator will adjudicate your claim and submit it into the liquidation for dividend purposes to rank equally with other unsecured creditors.
Are the directors personally liable for the company’s debts?
Generally speaking no, unless the directors have personally guaranteed individual debts or are found to be in breach of their duties as directors or have undertaken acts which are in breach of the various provisions of the Insolvency act 1986 e.g. wrongful trading, fraudulent trading, amongst others.
How long can a director be disqualified for?
The period of disqualification is subject to the discretion of the court taking into account the directors own degree of responsibility subject to a minimum period of two years, where the disqualification is based on unfitness of the director, and a maximum of 15 years. The court may also give consideration of mitigating factors for instance a person’s good reputation, age, health and whether others influenced him.