Involvement of directors in insolvency processes
The initial stages
The directors will usually be involved in the appointment process. If an appointment is forced by another party, e.g. creditor or funder then the involvement will inevitably be less.
Directors will be expected to assist in all stages of the process whether it is a hostile appointment by another party or whether it has been instigated by the directors.
The early days
These are usually hectic if the business is continuing to trade and all staff will be expected to help. This is covered in a little more detail in the employee section.
The first creditors' meeting
In some circumstances the directors may not be required to attend this meeting. If their attendance is requested then there are implications of failing to turn up.
Such meetings are usually run by the Insolvency Practitioner concerned with the involvement of the directors limited to answering questions from creditors.
Investigations
For most insolvency procedures the Insolvency Practitioner is required to submit a report on the conduct of the directors and also has a responsibility to investigate the affairs of the company. This may involve significant correspondence and explanation from the directors of the company.
The hardest parts
The process is not an easy or pleasant process but typically directors find that the following stages are the most difficult from a personal perspective:
Establishing and recognising that the business cannot be rescued and needs to be placed into an insolvency procedure;
The day of appointment and facing the employees who may or may not lose their jobs;
The day redundancies are made; and
The meeting of creditors.
