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When a business enters insolvency, a company director needs to know what they can and cannot do. If they act outside their powers they are personally exposed to a claim against them.

In the next instalment of our companies in crisis Q&A series, senior litigation lawyer Mairead McErlean talks through what directors can and cannot do.

Key points

It depends on the type of formal insolvency that your company enters into:

Compulsory liquidation: You lose all power to conduct acts in the company’s name or to control the company’s affairs. These powers are lost on the date of compulsory liquidation.
Voluntary liquidation (members or creditors): Your powers are lost at the date of the voluntary liquidation. If you try to exercise your powers after this date, any action is void.
Administration: You need the consent of the administrator before you can exercise any management powers.

If your company becomes insolvent you will be interviewed by the insolvency practitioner. They will investigate the conduct of all company directors and if they think your conduct has fallen below the standard stated expected by law, they may bring appropriate claims against you.

If you think your company may become insolvent, you should always seek immediate professional advice. Our insolvency experts can talk you through your options.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.