Running a struggling company is not just a commercial challenge; it carries legal duties that sharpen as the finances worsen. Knowing them protects both the company and you.
The duty shifts towards creditors
Normally directors act in the interests of the company and its members. As insolvency looms, that duty increasingly requires you to have regard to creditors' interests — to avoid worsening their position.
Avoid wrongful trading
Continuing to run up debts when you knew, or should have known, there was no reasonable prospect of avoiding insolvency can expose a director to personal liability. Keep records of your decisions and the reasons for them.
Take advice at the right moment
The safest course when insolvency is a real risk is to take professional advice promptly. It is not an admission of failure; it is exactly what a responsible director does, and it protects you personally.
Free services and a licensed insolvency practitioner can explain your duties in your specific situation.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: Directors' duties when a company is struggling, Director duties when a company is in financial difficulty, Is my company insolvent, or just short of cash?.