Company directors urged to seek advice early if facing difficulties

A leading North West law firm is urging company directors to ensure they fully understand their responsibilities under relevant legislation or face serious penalties if found guilty of wrongful trading.

Mace & Jones says in the current unstable financial climate directors of companies need to be extra careful of ignoring the various directors duties contained within both the Companies Act 2006 and the Insolvency Act 1986.

Directors need to take legal advice as soon as their company hits financial difficulty. Failure to act risks facing personal liability for debts and potentially a criminal record.

Insolvency and Corporate Recovery partner Dominic Vincent said: “It is vital directors take early legal or financial advice to avoid any risk of fraudulent or wrongful trading. When a company is insolvent a director's position changes. Under insolvency legislation they can be personally liable if a liquidator can prove they were operating while knowing there was no reasonable prospect of avoiding liquidation.”

Mr Vincent said directors who can show they acted in good faith, on the advice of suitably qualified professionals, are more likely to minimise the risks of personal liability or of disqualification proceedings being brought against them under the Company Directors Disqualification Act 1986.

“Directors need to continue monitoring the financial position of the company,” he said. “They also need to formulate viable strategies, hold regular meetings, keep major creditors informed and make announcements about the company’s shares. Deploying these methods show responsibility and should help protect the directors.”