People are often advised by their accountants that they should structure themselves by starting a company for one main reason: limited liability of directors, shadow directors (people who may not be registered as a director but for all intents and purposes are the guiding minds of the company) and other corporate officer holders (Corporate Officers). However, this ignores the many ways in which Corporate Officers can become personally liable for a company’s debts.
In recent times, there has been significant media attention on aspects of personal liability of this group in the areas of:
In the wake of COVID-19, legislation has been enacted including protection for Corporate Officers who trade whilst insolvent. However Corporate Officers beware. This change only provides limited protection for insolvent trading. It does not provide a shield in relation to the other exposures.
But I thought being protected from insolvent trading meant I would not be personally liable for company debts?
There are several company debts which you may become liable for. These include:
Corporate Officers should not ignore their obligations to monitor and consider financial performance.
Protections known as safe harbours were introduced some time ago to protect Corporate Officers from insolvent trading claims where liabilities are incurred at a time where the company is or might become insolvent as a result, but has developed or is developing one or more courses of action that are reasonably likely to lead to a better outcome for company and its creditors.
Our view is that Corporate Officers ought to be proactive and notwithstanding the temporary protection, actively engage with the safe harbour protections. This will enable them, at the conclusion of the temporary relief, to continue develop and implement plans and minimise the risks which will continue to impact them even when the COVID-19 pandemic is over.
Corporate Officers should carefully look at, consider and analyse the financial performance of the company, and document their actions. They need to:
Aitken Partners will guide you through these troubled times with the aim of protecting your wealth. The corporate shield has been torn down and the despite the recent Government legislation, Corporate Officers personal wealth remains at risk in this very trouble time.
Further support is likely to become available and changing rapidly. Engage with us to ensure that you maximise your chance of making it through this pandemic with your personal wealth intact. Don’t go it alone.
Aitken Partners is committed to assisting you during this period We will remain accessible throughout the pandemic. If you need legal help please contact the following: