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Why Directors’ Duties are Relevant to Corporate Insolvency


Why Directors’ Duties are Relevant to Corporate Insolvency When a company is insolvent, the powers of those involved with the company can be severely restricted, meaning it could be difficult, if not impossible, to ratify any director’s actions that have breached the Directors’ Duties as codified in Part 10 of Chapter 2 of the Companies Act 2006. If any of the company’s directors have breached their duties to the company, the liquidator can bring proceedings on behalf of the company, against those director(s) who committed the breach. Duties vary depending on whether a director is an executive director or a non-executive director. To qualify as an executive director, a director must not only be a member of the board of the company, but also be a full time employee engaged in the day-to-day management of the company. An executive director has two specific sets of duties that stem from these two conditions. Thus an executive director has a set of duties relating to their


status as a director, and a set of duties relating to their status as a full time employee, evidenced by a contract within which the employee duties are stated. A non-executive director only owes the company the set of duties associated with their role as a director on the board. Both executive and non-executive directors owe the same standard: non-executive directors do not have a lesser duty to the company than an executive director because they only fulfil a part-time role on the board. They are still required to have sufficient knowledge to help guide and monitor company management.

More about Insolvency and Liquidation: http://www.liquidation.co.uk

Why Directors’ Duties are Relevant to Corporate Insolvency  

When a company is insolvent, the powers of those involved with the company can be severely restricted, meaning it could be difficult, if not...

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