Directors
Directors are usually the first people to identify that the business they run has a problem.
How a director reacts to such circumstances is very important and will directly impact upon the outcome and resolution of the problems. Typically the businesses that survive are ones that recognise the problem early and take steps to address the problems before the business runs out of cash.
Directors of a business should continuously monitor the performance of a business. The law assumes a certain level of competence and failure to have this expertise is not a valid excuse for not taking appropriate action. Therefore all directors, no matter what area they oversee, should ensure that they are aware of the company's situation in terms of current financial position and future strategy.
Should there be indications that the business may be experiencing difficulties, the directors should undertake a review to establish if there is a real problem. The problem identified may be small and simple to rectify or could be a material or fundamental problem (or somewhere in between).
Once it is established that there is a problem, the cause needs to be determined. Once this has been established then the options available can be considered and implemented.
The following sections look at these aspects in a bit more detail.
Following this the sections look at the risks to directors and other aspects when faced with an insolvent business.
