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Personal liability offences

Once a business is insolvent there are offences under the Insolvency Act 1986 and Companies Act 2006 that could result in the directors becoming personal liable for the company’s debts.

There are many offences but the main ones are:

  • Wrongful trading – if a director allows a business to continue to trade whilst it is insolvent they may be personally liable for any deterioration in the company’s position.
  • Preferences – once a company is insolvent directors are expected to treat creditors equally.  Paying one and not another could be considered to be a preference and result in action against the recipient and the directors.
  • Transactions at an undervalue – selling company property for less than it is worth or giving it away can result in personal liability.
  • Misfeasance – any activity that results in a financial loss to the company may be reviewed and could result in personal liability towards the directors.

Disqualification

In addition to personal liability if the directors have not acted appropriately they may be disqualified from being involved in the management of a business. 

How to avoid personal liability





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