Company directors 'at more risk of being sued'

Current insolvency figures suggest that company directors in the UK are at more risk of being sued, it has been claimed.

Insolvency Service statistics have revealed that there were almost 5,000 compulsory and creditors' voluntary liquidations, which was a 56 per cent increase from 12 months earlier.

Robin Farquhar, head of specialist lines for Aviva, said insolvency tends to "intensify" a director's duty to creditors.

He explained: "Insolvency practitioners will often try to recover money for a company's creditors by bringing a claim against a director for either a breach of their duties, or fraudulent or wrongful trading."

A failure to recognise the "ins-and-outs of the law" would also act as no defence in such a situation, he added.

Recent research by Hiscox found that over half of small businesses are confident they will survive the downturn, while just nine per cent have been forced to make redundancies due to the current economic climate.

Drew Nesbitt, a solicitor specialising in Commercial Law at Wilson Nesbitt solicitors in Northern Ireland, commented that "there are multiple ways in which an insolvency practitioner can take action against a director including Preferences, Wrongful Trading, Fraudulent Trading and Breach of Directors Duties. If a company is going insolvent the directors must take advice from the relevant professionals to ensure that they do not become personally liable for the debts of the Company."
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