January 2009

Directors - and, to a lesser extent, other officers of a company - face a number of areas of potential personal liability. Of most relevance is the liability of the directors for 'wrongful trading'.

The directors will need to consider as a priority the viability of the company and how to proceed, which will include consideration of whether the company should be put into a formal insolvency process. Generally, assistance will need to be sought from a specialist Insolvency Practitioner.

Any attempt by the company to sell off assets at this point at an 'undervalue' or to give a 'preference' to a creditor, guarantor or surety of its debts, could be vulnerable to later challenge by a liquidator, who has the power to set aside such transactions.