Directors warned to keep vigilant

Directors of local businesses are being warned to remain vigilant over their responsibilities despite a slow down in liquidations and personal insolvencies.

Recently released statistics reveal for the third consecutive quarter in 2010, liquidations and personal insolvencies have fallen by 14% and nearly 4% respectively over the same period last year.  However, on a daily basis company directors are still being prosecuted successfully, receiving custodial sentences as well as fines, as a result of breaches in their responsibilities.

Locally based business rescue and insolvency specialists, Marshman Price, have highlighted one case where a director was sentenced to a total of 16 months imprisonment for offences he committed whilst acting as a director of two companies. 

A bankruptcy order was made against the man.  Despite being barred from doing so (due to being an undischarged bankrupt), the man acted as a director of a second company.  His failings were compounded by the fact that the second company traded under a name that was so similar to the previous (failed) company as to suggest an association with the first. 

Not being quite enough, the investigation finally discovered that the man had given bank account details of the new company to customers paying for services from the old company, therefore diverting more than £22,000 away from creditors.

“This is one of the more extreme cases of a director neglecting his responsibilities, but nevertheless a harsh warning that thorough investigations are being undertaken and action will not be delayed if any discrepancies are found”, warned Alan Price, managing director or Marshman Price.

“Whilst probably not resulting in imprisonment, knowingly trading when you cannot meet all your liabilities may result in directors being held personally liable for losses ‘recklessly incurred’, coupled with potential disqualification proceedings where you cannot act as a director of any company for up to 15 years. 

“Deciding whether to continue trading is a terribly difficult choice, especially having invested huge amounts of money, time and hard work, but if the company encounters financial difficulties, it is your responsibility as a director to act decisively.  The impartial advice of a qualified insolvency professional is invaluable at an early stage”, concluded Alan.

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