Directors' Duties


The duties and responsibilities of an individual who acts as a Director are extremely wide and are governed by various items of legislation, the Company's own Articles of Association and any relevant Contract of Employment. 

It should always be remembered that the terms of a contract cannot exempt a Director from their statutory obligations and that ignorance of those obligations is no defence to any breach.

Directors' Personal Liability

Following on from the formal insolvency of a Company, Directors can be held personally liable to make a financial contribution to the deficiency suffered by creditors where their actions prior to the formal insolvency warrant same.  For the purposes of general information at this time a brief comment follows on two common areas where personal liability arises as follows:-

Wrongful Trading

This has not to be confused with fraudulent or criminal trading but it can have significant implications for Directors personally.

In short, if a Company has gone into insolvent Liquidation and prior to its Winding Up a Director of the Company knew or ought to have known that there was no reasonable prospect that the Company would avoid going into insolvent Liquidation then that Director can be required by the Court to make a payment representing an appropriate contribution to the deficiency of the Company.  

It will be seen therefore that a Director has not only a legal and moral obligation to take appropriate steps if a Company is insolvent it is actually also in their own best personal interests because by taking those steps they can at best wholly avoid personal liability and at worst mitigate any potential liability.


Directors can be held personally liable to make a contribution if ordered by the Court towards a Company's deficiency where it is found that their actions pre Liquidation have resulted in a financial loss suffered by the Company.

The whole matter of Misfeasance covers a very wide range of activity but can be generally summarised as the Directors having breached their "fiduciary duty" to the Company. 

Directors' Obligations Post Liquidation

Directors do not cease to be Directors on the Liquidation of a Company.  Many of their legal obligations continue post Liquidation and indeed there are a whole raft of new obligations which arise as a result of the Liquidation inclusive of fully co-operating and assisting the Liquidator on a variety of matters.

The Directors' executive authority relative to the management of the Company ceases on Liquidation or indeed earlier on the appointment of a Provisional Liquidator other than to the extent that they are instructed to act by the Liquidator.

There are a myriad of areas in which a Director can inadvertently breach their obligations and it is imperative that the appropriate professional advice is sought at an early stage.

We can assist Directors in ensuring that they are fulfilling their obligations and duties and offer a initial consultation free of charge.