Some Common Questions asked by Directors on Liquidations
By The Insolvency Service
Q. I was a director of a company that has gone into liquidation. How will it affect me?
When a company goes into liquidation the directors no longer have any control over it and the liquidator takes over. You have a duty to co-operate with the liquidator and must identify all assets and liabilities of the company and provide details of its affairs. The liquidator has to make a return under the Company Directors’ Disqualification Act 1986 about the directors’ conduct in relation to the company.
Q. What are my duties as a company director in compulsory liquidation proceedings?
In compulsory liquidation proceedings, the company's directors must:
• give the official receiver information about the company's affairs;
• give any insolvency practitioner who is appointed liquidator information about the company's affairs and attend for interview when reasonably required;
• look after and hand over the company's assets to the liquidator or official receiver; and
• look after and hand over the company’s books, records, bank statements, insurance policies and other papers relating to its assets and debts.
Q. I was a director of a company in liquidation. Can I be held personally liable for any of the company’s debts?
No claim can be made on a director's personal assets in respect of company debts unless:
• You have given a personal guarantee, or provided alternative security, in respect of the company debts; or
• Successful wrongful trading proceedings are started after a company has gone into insolvent liquidation. The liquidator may apply to court for an order that you should contribute to the company's assets. This could happen if, before the winding up began, you knew - or should have concluded - there was no reasonable prospect of avoiding insolvent liquidation, and you failed to take every step to minimise the potential loss to the company's creditors. Such proceedings are know as wrongful trading (section 214 of the Insolvency Act 1986) and are civil proceedings; or
• HM Revenue and Customs make a claim under the tax regulations for your personal liability in respect of unpaid PAYE on their remuneration.
Unless any of the exceptions outlined above apply, a creditor cannot make a claim against you or your assets. If any of the exceptions do apply, you should discuss the matter with the creditor involved and the liquidator.
Published April 2013