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Understanding the full extent of directors’ duties
Company directors facing financial difficulties within their business need to ensure all legal responsibilities are taken into consideration before any personal consequences arise.
“Taking on a directorship is not a decision that should be taken lightly,” said Ryan Holdsworth, from the Sheffield office of insolvency and business turnaround specialist Leonard Curtis.
“Directors should always be aware of their duties and have a full understanding of the responsibilities and conduct of their fellow directors because there is no room for passing the buck.
“The government offers some sound practical advice with its own website, the Director Information Hub, which has some really useful information on directors’ duties.”
From dealing with responsibilities to identifying the risks of potential insolvency, the hub is a gateway to extensive government and industry resources for directors.
“The reality is that too often we see that people do not have the right resources to really understand what directors need to do, but the website is both easy to understand and digestible in terms of duties and responsibilities,” said Ryan.
“The fact that one director might be responsible for financial affairs does not absolve the other directors from having a firm grasp of areas of the business and everybody needs to be fully aware of their duties.
“It is particularly important that directors be fully aware of restrictions on payments if their company does become insolvent.
“You cannot prefer one creditor over another and in certain circumstances you could find yourself personally liable for the debt.
“Directors should at least be able to demonstrate that the financial information they receive is correct and that they have an active part to play in the decision-making process in such areas as managing accounts and cash flow predictions.
“And above everything else, a good director is the one who seeks professional advice as soon as they realise there is a problem.”
The Directors Information Hub can be found at www.gov.uk/guidance/director-information-hub
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