What is contentious insolvency?
Contentious insolvency covers insolvency disputes and legal issues that can arise when a company becomes insolvent.
When a business is insolvent, there may be allegations of wrongful or fraudulent trading or breaches of directors’ duties. A liquidator or administrator might seek to recover overdrawn directors’ loan accounts, unlawful dividends, or preferential payments. If liability is established, consequences can include repaying large sums, director disqualification, or even criminal prosecution.
Our Dispute Resolution team regularly advise business owners, directors, shareholders, liquidators and administrators on insolvency disputes. We provide clear guidance on these matters and help manage any related claims.
Director Disqualification
Director disqualification is a legal process under the Company Directors Disqualification Act 1986 that addresses insolvency-related misconduct.
When a company faces serious financial difficulties, directors must act in the best interests of creditors. If a director breaches their duties, they risk personal liability and even criminal charges. That’s why getting clear advice, early, is crucial.
Our team has extensive experience advising on all aspects of director disqualification. We support directors facing allegations such as breaches of duty, wrongful trading, or unfit conduct, and regularly act for insolvency practitioners and other stakeholders pursuing disqualification claims.
Whether you are defending a claim or considering taking action, we can provide practical advice to help you understand the process and protect your interests.
FAQS
What is insolvency?
Insolvency happens when an individual or business cannot pay their debts as they fall due, or when their liabilities exceed their assets.
For businesses, insolvency can lead to formal procedures like administration, liquidation, or company voluntary arrangements (CVAs). These are designed to protect creditors and, where possible, rescue the business or recover funds.
Insolvency often raises complex legal issues, especially when disputes, allegations of misconduct, or asset recovery challenges arise. At Buckles, we offer clear, practical advice on all contentious aspects of insolvency, helping clients resolve issues efficiently and with confidence.
Can an insolvent company continue to trade?
Sometimes an insolvent company may continue trading, for example during administration or while negotiating a CVA. But directors must be careful. Continuing to trade while insolvent can expose them to personal liability, especially if it causes further losses to creditors.
Directors have a legal duty to act in creditors’ best interests once insolvency is likely or confirmed. Failing to do so can lead to claims for wrongful trading, disqualification, or other legal consequences.
What is the Insolvency Act 1986?
The Insolvency Act 1986 is the primary legislation governing insolvency law in the UK. It sets out how individuals and companies handle financial difficulties when they cannot pay debts.
The Act covers processes including administration, liquidation, company voluntary arrangements (CVAs), bankruptcy, and the duties and powers of insolvency practitioners. It also addresses director misconduct and protects creditor interests.
Can a director resign from an insolvent company?
A director can resign from an insolvent company, but resignation does not protect them from any wrongdoing or mistakes made while they were in office.
Directors should be cautious when resigning during insolvency, as they may still be held responsible for wrongful trading or other conduct during their tenure. Proper documentation and notification of resignation according to company law and the company’s articles is essential.
At Buckles, we advise directors on the risks and correct process of resigning in financially troubled companies.
What are Director Disqualification Proceedings?
Director disqualification proceedings are legal steps taken to stop someone from being a company director for a set time. This usually happens if a director has broken the rules, especially around money problems or bad behaviour in the company.
Under the Company Directors Disqualification Act 1986, a court can stop a director from managing a company if they’ve done things like wrongful trading, acting dishonestly, or not keeping proper records.
The disqualification can last between 2-15 years depending on how serious the problem is. It’s important because it means the person cannot run or manage a company during that time.
