When a business has failed and the company is placed in liquidation, the person appointed to sell the company’s assets and pay whatever he can to the creditors is known as the Liquidator. He is obliged to report any wrongdoing by the directors to the disqualification unit of BIS and to creditors and may pursue the directors personally for any loss suffered by the company as a result of their actions.
The two most common types of reviewable transactions are transactions at an undervalue and preferences.
Transactions at an undervalue occur when a company sells its assets for significantly less than they are worth.
A company gives a preference to a person if the company ensures that monies owed that person are paid when the debts due to others are not. Paying a creditor who is threatening to issue a statutory demand is not a preference as there is no desire to prefer, only the commercial realities of the situation.
Directors should be mindful of potentially reviewable transactions whenever they enter into arrangements.
Directors should also be mindful that they will become personally liable for the debts of a company if they allow the company to carry on trading whilst insolvent when there is no reasonable likelihood of the company being able to trade out of its difficulties.
Our experienced team of insolvency experts have successfully helped many directors avoid such claims from arising but if advice is not sought until after the company has gone into liquidation then we can act for you in defending such claims where possible or to negotiate settlements of such claims.
For a confidential discussion with one of our specialist lawyers, please call our free phone number 0800 949 9123 or email us via the contact form
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