Claims by Liquidators Against Directors
These are the heads of claims commonly raised by liquidators:
- Repayment of the balance of director’s loan accounts – these typically arise when drawings are made from the business without a declaration of director’s fees or dividends
- Claim for repayment of unlawful dividends – in particular, dividends may be reclaimed from the directors if not supported by profits available for distribution at the relevant time
- Wrongful trading – where the directors knowingly continue to trade whilst the Company is insolvent
- Claim for carrying on business with intent to defraud creditors
- Applications to set aside transactions at an undervalue – this often occurs when directors receive gifts or enter into transactions with the Company at an undervalue
Company Insolvency
If the company is insolvent, the directors’ primary duty is to protect the interest of the creditors. This will normally require the directors to consult a licenced insolvency practitioner for professional advice. Also, in such a situation, the directors must be careful not to prefer one creditor over another. Detailed advice will need to be taken concerning this aspect.
Payment by an insolvent company to its bank account if it reduces the overdraft may amount to a preference in relation to the release/reduction of a personal guarantee given by the director(s) to the Bank.
We have a strong insolvency team. Please click here or call 0208 446 6223 or email enquiries@sr-law.co.uk for assistance.