Claims Against Directors

Claims Against Directors

Claims against directors by businesses are tough. Unless there is a personal guarantee, it can be very difficult to persuade a court that you should be entitled to pursue the directors personally, rather than just the company who owes you the money.

Proposed Changes By The Liberal Democrats

At the Liberal Democrat annual conference this week, Vince Cable set out proposed tougher sanctions on rogue directors. He referred to a “small rotten core” of company directors, who needed to be banned from running businesses and making the process easier to follow. He wants to end the “slap on the wrist” directors can receive.

The aims of the proposed new regulations are:

  • To make the system fairer for all businesses. Why should rogue directors flout the rules and be able to continue in business.
  • Compensating people who suffer losses arising from the conduct of directors guilty of criminal or reckless behaviour.
  • Ensuring that directors who are banned from companies abroad should not be allowed to run companies in the UK.
  • To focus on the protection of employees such as considering the rise in zero hour contracts and restrictive covenants in employment contracts.
  • Potentially raising the minimum wage again.

The starting point is that if the debtor who owes you money is a company, then you must pursue the company. It is possible to bring claims against directors personally but it is usually very difficult to succeed.

If the company that owes you becomes insolvent, a liquidator should investigate the conduct of the directors and how the company has ended up in the state it is. The liquidator can take action against the directors to get them to pay money to the company, to be made available to the creditors. The liquidator must send a report with the government will consider and decide whether to bring disqualification proceedings against the defendant. Whist these processes will no doubt be unpleasant for the director, they may not help you recover any money.