In a my blog dated 21 December 2016 (see: http://www.breezeandwyles.co.uk/more-bad-news-for-directors-and-their-personal-liability/) I talked about the new risk to directors in the context of Director Disqualification investigations being that the Secretary of State can now also seek compensation from the director(s) where loss has been caused to one or more creditors of the company. That is for the benefit for that creditor or creditors.
In a magazine aimed at Licensed Insolvency Practitioners (Dear IP) the Secretary of State (that is the Insolvency Service (the ‘IS’)) set out in broad terms what their approach is likely to be.
THE DIRECTORS EXPOSURE:
It would appear that the director at most risk of being subject to disqualification and concurrent compensation proceedings for personal liability is where:
- Other remedies have either failed or for, whatever reason, are not available. For example, the Liquidator or Administrator failed or was for financial, legal or factual reasons unable to bring a claim;
- The director has not made any other financial contribution in recompense for the misconduct;
- The Liquidator, Administrator or the prosecuting authorities in a criminal referral have not indicated to the Secretary of State that they are bringing or contemplating bringing action against the director;
- The Liquidator or Administrator have identified that the director has financial means. However, in which case the director should be mindful that any separate cause of action could be assigned by the Liquidator or Administrator to a purchaser of insolvency claims to be pursued; and / or
- Creditors have not taken action themselves.
Therefore, with the new compensation regime it is the case that a director of a company is now further exposed to further risk of personal liability.
The well-advised director should be mindful of whether or not they are exposed to a claim for compensation and should seek and obtain legal advice as soon as they are written to by the IS making enquiries about a company. This is important because the solicitor can advise you on where your financial exposure may lie and how to mitigate that.
WHAT TO DO NOW:
My name is Richard Cole. I am a Solicitor who formerly worked at the IS carrying out director disqualification investigations. I am now the Directors Friend. Why not contact me to discuss on: +44(0) 1992 558411. The earlier that you speak with me the more that I can help.
Why not sign up for my seminar – http://www.breezeandwyles.co.uk/the-directors-friend-helping-you-on-the-road-ahead/? Only a month to sign up now!
Until the next time…
THE DIRECTOR’S FRIEND