Directors Liability Review

If your business were to ever fail, do you know how this will impact you personally?

Nobody plans for business failure but why not act now to ensure that if things go wrong, you have taken steps to protect yourself. PGUK’s Director Liability Review (“DLR”) will:

•    Identify and validate all potential claims and liabilities
•    Include a review of your personal financial circumstances to limit your exposure
•    Recommend an action plan to renegotiate, mitigate or eliminate these claims
•    If claims cannot be avoided, provide a guide as to what you will need to settle them
•    Recommend a further action plan to maximise the redundancy and statutory entitlements due to you in the event of insolvency

Directors can be subject to lots of different claims, many of which you may not even be aware of

Being a company director means that in the event of business failure you can be subject to many different personal claims. The most obvious are personal guarantee claims for funding, trade suppliers, lease agreements and property leases. However, it is not just personal guarantee claims that could cause you a problem. There are many different types of complex antecedent transaction claims and misfeasance claims which can be brought by the insolvency practitioner for actions you have taken during your time as a director. Many directors enter insolvency with no prior knowledge of the issues they may face or the personal financial claims which may result.

Taking action early can limit your exposure

In the event of a claim against you it is not necessarily about what you owe but more about your ability to pay or more importantly, the ability of the creditor to enforce a recovery from you. By reviewing your financial circumstances a set of recommended actions can be implemented to reduce your exposure and therefore limit recoveries due through any legal action creditors could take. The result is to position you to achieve the lowest commercially justifiable settlement figures possible should claims be unavoidable.

It is not always the financial implications of claims which can cause you problems. In some circumstances the actions taken by you as a director can result in a case being brought against you by the Insolvency Service. This can lead to you being disqualified as a director.

The key DLR deliverable – An action plan you can implement with confidence

Contained within the DLR is a full action plan which can be implemented in conjunction with your professional advisors. Understanding what your current and potential liabilities is complex. It involves both insolvency and accounting knowledge and an understanding of the relevant Company Act legislation.

When taking any action to eliminate or mitigate your liabilities it is essential to ensure that those actions do not result in further claims against you. Antecedent transactions and misfeasance claims against directors in the event of insolvency are complex and need careful consideration.

“If your bank is insisting on an Independent Business Review (“IBR”) in order to assess their risk, you need to take action to protect your own position.”