Every liquidation involves a review of the Company's affairs.
That review is routine, and it happens in every single case.
A Liquidator has a legal duty to examine what happened before insolvency and to report on the conduct of the Directors. Knowing what they look at removes most of the fear.
Understand the process before it begins, not during it.
4 THINGS EVERY DIRECTOR SHOULD UNDERSTAND
A report on the conduct of every Director is required in every insolvent liquidation, whether or not anything is suspected.
Being reported on is standard procedure. It is not an allegation and it is not a finding.
A review is not an accusation.
Payments to any source shortly prior to liquidation will be critically analysed and the Liquidator has great powers to recover those funds if a criterion is met.
The Liquidator will look back at payments spanning 2 years to you and somebody connected to you; and 6 months to a non-connected party.
Who was paid matters as much as when.
An overdrawn Director's loan account is an asset of the Company, and the Liquidator will seek repayment.
Dividends drawn without sufficient distributable reserves can be treated the same way.
Often the first thing a Liquidator checks.
Directors have a legal duty to cooperate and to deliver up the Company's books and records.
Straightforward, well-documented answers resolve most queries. Silence and missing records do the opposite.
How you engage shapes the outcome.
MOST INVESTIGATIONS END WITHOUT ACTION.
The review is routine. Being able to explain your decisions is what makes the difference.
Take a breath. A Liquidator is establishing what happened, not building a case against you.
Difficult decisions taken in good faith during a crisis are not misconduct.
What matters is that you can explain what you did, and why, at the time.
Don't meddle with the records
Altering documents turns a routine review into a serious problem.
Don't repay yourself first
Payments to you and connected parties will be examined in detail going back 2 years.
Don't dispose of Company assets
Transfers before liquidation are examined closely.
Don't guess at answers
Check the records first. Incorrect answers are hard to withdraw.
Don't go quiet
Non-cooperation is itself reportable, and it invites scrutiny.
A confidential discussion today could help protect you tomorrow.
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THIS WEBSITE PROVIDES GENERAL INFORMATION AND DOES NOT CONSTITUTE LEGAL OR INSOLVENCY ADVICE. Your position depends on the individual circumstances of each Company and Director. You should obtain advice from an appropriately qualified professional, including a licensed insolvency practitioner where appropriate.
