transparent insolvency advice
Directors and the consequences
- Directors have an obligation to ensure the payment of corporation tax, PAYE, NIC etc, and any failure to set aside such payments is therefore a breach of the director’s fiduciary duty to the company.
- If a company is facing financial difficulty, the directors should not continue to pay dividends, take out directors loans, pay themselves substantial remuneration, or even pay key creditors such as important trade suppliers.
- If a company has set up an Employee Benefit Trust scheme that has not been approved, HMRC can wind-up the company and nominate a Liquidator who has the power to pursue directors personally under the Insolvency Act 1986 for tax evasion.
- A Liquidator has an duty to report to the Secretary of State on the conduct of a director under the Company Directors Disqualification Act 1986. The decision on whether or not to proceed against a director is taken by the Secretary of State and not by the Liquidator.
- The minimum period of disqualification is 2 years and the maximum is 15.
- For these reasons, taking early confidential advice from MGA is essential for directors of a business in financial difficulty to establish the best choice to move forward.