Directors Liability Is Not Limited - Essential Guide To Protection

If the recession has caused your business serious difficulty you are in good company but real danger. In addition to the obvious concerns for survival, directors need to look out for accidental criminal behaviour whilst performing their duties that many have never encountered before and are simply unaware of.

Help and Advice

So, as a director of a business, how do you survive this harsh climate and get the best help and advice when it is needed? Well, a little known group of professionals known as turnaround managers or corporate restructurers specialise in helping shareholders and directors of troubled businesses to survive in preparation for growth. They do this by stabilising the cash situation and dealing with creditors, and then if necessary restructuring the business to move forward into new growth. Most take a team approach with legal, accounting, marketing and insolvency professionals to assist the board. They know that the key to dealing with a business crisis is being realistic and knowing what you can and can't do. Don't put your head in the sand, you must be proactive to survive and make yourself fully aware of the regulations and duties on a director. To help you do just this on such Turnaround Practice, K2 Business Rescue, have produced a reference guide called "A Practical Guide for Directors, Executives and Advisors". The Guide gives a clear outline of the main duties and responsibilities of directors in troubled businesses with a strong emphasis on survival it is available free on their website www.rescue.co.uk.

Accountability and Liability - know the rules

The Guide outlines the duties and responsibilities of a director and company secretary and provides notes on the legislation that you need to abide by. It is vital for advisors and non-executive directors to understand that in the eyes of the law they are equally responsible as executive directors if the company should get into financial difficulty? It is not only registered directors that the law treats as a director, executives and advisors are legally directors when the company gets into difficulty and their decisions are equal to those of a director?

Did you know that all directors are now bound by a set of seven 'codified duties', as set out by the Companies Act 2006 that came into effect in 2008? directors who fail to comply may result in both civil and criminal action against them and the possibility of being disqualified as a director for up to 15 years. The Insolvency Act 1986 is very clear that directors of insolvent companies are required to act in the best interests of creditors. Properly advised, directors can avoid personal liability by demonstrating they have acted properly.

Is Your Company Actually Insolvent?

This Guide also covers relevant aspects of the Directors Disqualification Act 1986 and the Insolvency Act 1986, and details the four primary tests to determine whether your company is insolvent, which can be the case even if you still have a strong balance sheet.

It is legal to trade whilst insolvent in certain circumstances where it is in the best interests of creditors. However I would only advise this is done with the support of a solicitor with experience of insolvency or a licensed insolvency practitioner, as these experts offer your best protection against becoming personally liable for your company's debts. The Guide should help you establish your objectives and offers guidelines in the form of continuance principles if you do decide to trade while insolvent.

Act Now

As a director you can risk everything you have if you fail to seek advice when things get sticky. Your existing bankers, accountants and other advisers are likely to be creditors with their own agenda, whereas help from independent advisers like K2 Business Rescue will put you and your company's interests first. So don't leave it too late, contact a qualified advisor today for some advice. At least get a free copy of the Guide and take some of the worry out of being a director in these difficult financial times.