Directors Obligations Solicitors

The law relating to the legal responsibilities and duties of directors is becomingly increasingly complex

Company directors have legal duties to act in the interest of shareholders, creditors, and other stakeholders. Directors in breach of these duties may find themselves facing civil claims for personal liability or criminal prosecution. The duties of directors differ depending upon whether they are an executive director, a non- executive director, a de jure director, a de facto director, or a shadow director.

Directors are under an obligation to comply with duties set out in the Companies Act 2006 which include a duty to promote the success of the company, to exercise reasonable care, skill and diligence, and to exercise independent judgement.

A shadow director is an individual that gives directions or instructions and the directors of a company are accustomed to act on those instructions. A shadow director is defined in the Companies Act 2006.
A de jure director is an individual who carries out the functions of a director but who has not been formally appointed as a director.
A de facto director is in principle the same as a de jure director, an individual who carries out the functions of the director but has not been formally appointed as a director.
Wrongful trading occurs when a company continues to trade whilst insolvent. Insolvency is when a company is unable to pay their debts as they fall due. This situation usually arises when the directors of a company hope that the company will recover from the poor financial situation that it is currently in. In claims of wrongful trading, there is usually poor judgement on behalf of the directors of the company but no intent to defraud the company's creditors.
Fraudulent trading in comparison to wrongful trading is when the directors of a company knowingly carry on business with no intention to pay their creditors.
During the process of a liquidation, a liquidator can report findings of wrongful trading to a court, however, there must be sufficient evidence in order for a court to make a finding of wrongful trading, as there is a higher burden of proof to satisfy.