Letter to directors in an insolvency situation warning of main legal risks


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Restructuring & Insolvency expert
Precedents

Letter to directors in an insolvency situation warning of main legal risks


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Restructuring & Insolvency expert

Precedents
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You recently came to see us/contacted us as a director of a company in financial difficulties.

The purpose of this letter is to bring to your attention some issues that you should be aware of in your capacity as a director of the company and/or in your personal capacity as a director.

If a company is solvent and has no financial concerns then, broadly speaking, the company and its Directors owe fairly limited duties to creditors. The duties to shareholders takes precedence. However, when a company is insolvent, or is in the ‘twilight zone’, then the directors’ duties shift from being primarily owed to shareholders to creditors. You must be aware of this and act accordingly.

Taking the above into consideration, if you are a director of a company in financial difficulties you will need to make difficult decisions regarding the management of the company and, in particular, the treatment of its creditors.

You may also find yourself in a situation where there is a conflict between your own personal

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Directors definition
What does Directors mean?

A director of a company is responsible for the day-to-day management of that company. The directors make decisions on behalf of the company in order that it can carry on its business.

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