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When an officeholder is appointed in a matter they must file:
[See ‘Officeholder’.]
Directors have a fiduciary duty to act in the best interests of the company, its creditors and members (see ‘Fiduciary Duty’).
If a Liquidator investigates the company and the actions of its directors and discovers that a director or shadow director transacted when they knew, or ought to have concluded, there was no reasonable prospect of avoiding insolvent Liquidation the director can be pursued personally to make a compensatory contribution towards the insolvent estate.
The Liquidator or Administrator is not seeking to discover intentional or delinquent acts of directors, but those which demonstrate negligence or a lack of reasonable care.
If such actions are discovered and proven, there is a defence that the director(s) took every step with a view to minimising potential loss.
The remedy is a civil one (ie there is no criminal punishment), in that it will be an order for the director(s) to top up the fund of the insolvent estate by making a personal contribution to it. (See ‘Unlimited Liability’.) The sections of the Insolvency Act 1986 to look out for are section 214 for a Liquidation and section 246ZB for an Administration.
[See ‘Fiduciary Duty’, ‘Director’, ‘Shadow Director’, ‘Liquidator’, ‘Administrator’, ‘Liquidation’, ‘Administration’ and ‘Unlimited Liability’.]
