Responsibility for insolvency
Carillion, formerly the second-largest construction company in the United Kingdom, went into compulsory liquidation on 15 January. Unfortunately, this type of situation is not uncommon, as the number of companies that entered insolvency in 2017 rose by 4.2% to 17,243, according to the Insolvency Service.
Regardless of the size of the organisation, insolvency has significant repercussions for everyone involved—especially its directors and officers. The personal liability of your organisation’s leaders can arise in several ways, including the following:
Wrongful trading—The directors kept trading despite knowing that the company was insolvent.
Fraudulent trading—The directors carried on business with an intent to defraud creditors.
Misfeasance—The directors wilfully took actions that injured another party.
Redundancy notifications—The directors failed to notify the government of the collective redundancies.
While hopefully it never happens, if your organisation should go bankrupt, your directors and officers need to know how to ensure that they are not held personally responsible. The most effective protection is with comprehensive directors’ and officers’ liability insurance, contact the team at Lockyers to review your cover.