Insolvency issues with the debtor

There are difficulties in pursuing a corporate debtor that is:

• in liquidation, or
• liable to go into liquidation because it is, and has been in recent times, unable to pay its debts as and when they fall due.

It may be futile to pursue the corporation because, at the end of the day, it will either:

• not have sufficient funds to pay out the debt, or,
• not fully pay out the debt if it goes into administration or liquidation. That is, you will only get back a percentage of what is owed to you once you have proved the debt to the liquidator or administrator.

In certain circumstances, it can be possible to pursue the company’s directors personally.

Directors have an obligation to ensure that corporations do not trade while insolvent, or trade fraudulently.

Hence the term, “insolvent trading”.

Therefore, the legislation allows directors to be made personally liable for debts incurred by the company whilst trading while insolvent.

It can also be possible to recover your legal fees from the director or directors.

In other circumstances, insolvent or fraudulent trading can even lead to criminal charges against directors.

These types of legal proceedings can be complex and are best handled by lawyers on your behalf.