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personal liability

When a company is facing potential insolvency there is a temptation for a director to enter into certain transactions they would not ordinarily do.

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In the event of formal insolvency some of these transactions may be challenged by the appointed insolvency practitioner (the office holder), who may seek to recover funds for the company’s creditors. Below is a summary of the types of matters which may be considered:

What classifies a director?

The Companies Act 2006 simply defines a director as including any person occupying the position of director, by whatever name called.

What classifies a de-facto director?

A de-facto director (or director ‘in fact’) is someone who acts as a director but who has not been formally appointed (a person who has been formally appointed being a ‘de jure’ director or ‘director in law’). The matter is determined on an objective basis and irrespective of the person’s motivation or belief.

What classifies a shadow director?

A shadow director is someone who is not appointed as a director but who gives directions or instructions that the directors of the company are accustomed to act upon

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If your company is facing potential insolvency then it is essential that professional advice is sought in order to mitigate any exposure to personal liability.

Alternatively, you may be facing similar claims from an office holder already in place. We may be able to assist in negotiations with the appointed office holder to reduce or extinguish any potential liability

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