Advice to Directors
14th Apr 2020
Being a director involves many responsibilities, especially statutory duties. These need to be considered now, more than ever. In particular, from an insolvency point of view when it comes to creditors and declaring dividends on account of profits that may or may not be available.
Looking ahead, the Government focus is for businesses to survive the next 3 months. Many of the Government’s financial incentives result in liabilities being deferred rather than waived (the main exception being the Job Retention Scheme). VAT and Tax will still need to paid to HMRC.
A few tips:-
- The statutory duties owed to the company under sections 171 – 177 Companies Act 2006, and the powers of a liquidator to challenge transactions carried out by the directors, seek to protect the company’s assets for the benefit of its creditors. A director will only be in breach if he has acted with a lack of integrity or done something that no reasonable director would have done. The test is objective.
- Bear in mind misfeasance claims, undervalue transactions and preferential transactions, e.g. paying the Bank instead of HMRC as you have a personal guarantee.
- Wrongful trading claims involve increasing a company’s liabilities when the business is bound to fail.
- Prepare a plan to protect the company and your position against the personal risks to the director of continuing to trade.
- Take a salary not interim dividends to avoid a claim for unlawful dividends.
We are very experienced in dealing with HMRC and can advise on personal claims, time to pay arrangements and oppose winding up and bankruptcy petitions ( Simon add in links on our website).
As solicitors, advice we give to directors is legally privileged unlike accountants and Insolvency Practitioners .
Contact Peter Hastings on 01603 675639 or email firstname.lastname@example.org.