Director information hub: Consequences for directors
There are potential consequences for you, the director, if your company suffers insolvency.
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Formal insolvency
Unfortunately, some limited companies will enter a formal insolvency procedure despite the best efforts of directors.
The impact and severity of any consequences will very much depend on the individual circumstances of you, the director and your company.
Liquidation
If your company is liquidated, you must co-operate fully with the appointed liquidator, who has extensive powers.
If you do not co-operate, the liquidator has powers that include:
- being banned from being a director in the future
- having court proceedings instigated against you
- having a warrant issued for your arrest
Limited company, limited liability?
In some circumstances, directors can be held personally liable for company debts when their company enters formal insolvency procedures.
Legal consequences
Directors can face fines and criminal action if their company fails as a result of breaching the likes of company law, insolvency law, general trading laws and more.
Disqualification
The criteria for being disqualified as a director is extensive.
This includes, but is not limited to:
- neglecting your tax affairs
- persistent breaches of company law
- fraudulent trading
- not acting in the best interests of your company and/or its creditors
Disqualification can last for up to 15 years and you cannot be a director or control a company in that time.
If you ignore the disqualification rules you could face criminal proceedings.
Last updated 27 July 2023 + show all updates
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bullets were amended slightly on SME request being banned from being a director in the future having court proceedings against you having a warrant issued for your arrest
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First published.