commercial, property, estates and litigation lawyers
Insolvent Trading- Is Everyone At It?
Insolvent Trading- Is Everyone At It?
Despite the embarrassment, as a director of a large company, you will stop operating rather than risk insolvent trading. To do otherwise is to risk being personally liable.
On the other hand, a director of a small company can usually stand the embarrassment. Yet, with the family home at risk and a 4 wheel drive to support, it is tempting to press on and see how it goes unless someone unsportingly presses the point. In bad times, long term creditors such as banks and landlords do not want to shoot themselves in the foot by being trigger happy. But, if you have an ungrateful supplier who cannot wait for their money, as a director, you may be accused of insolvent trading. So what is it?
A company can take on any liability, it is only when the bill arrives and it cannot pay that a problem arises. A company which cannot pay its debts as, and when they become due is insolvent. Once the company is in this insolvent state and incurs a new debt (continuing debts such as rent and teenage children don’t seem to count) the company is trading insolvently and you as a director may be liable. You may deny that you suspected that the company was insolvent when the debt was incurred. This may work unless it was obvious, for instance, a reasonable director in your position would have suspected.
If sued personally by the liquidator or a creditor, you have basically two defences:
You could not stop the new debts being incurred e.g. you were too ill; or
You tried to stop the company trading but failed e.g. your spouse’s spending was out of control.
Insolvent trading can be difficult to prove legally. It is awfully easy to let a few billion slip through, as any bank will tell you.
S omeone has got something on their website which belongs to you. It could be a photograph, an article or all or part of your own website. You ask them to remove the offending item and they either refuse to do so or ignore you. In a perfect world you would launch a cyber attack, or send an 11 man Israeli assassination team dressed as tennis players to take them out. Less satisfying but just as effective, would be to have the host of the offending website switch it off until the offending items were removed by the website owner. Here is a three step plan to achieve this: • Tell your IT person the problem and ask him to find out who hosts the offending site. If you try to do this yourself you will be awash with terms; some vaguely familiar such as domain name and internet service provider (ISP) and others that are way out, such as WHOIS, carriage service provider, registrar and registrant. • Send the host a Take Down Notice. This is a request which identifies the infringing content a
In the past when someone owed you money one of the common and popular enforcement options was to cast him (or her) into a debtor’s prison where they would rot until they paid up with interest and costs. This is what happened to Mr Pickwick in The Pickwick Papers. He was accused of breach of promise in that he offered to marry his housekeeper, she had accepted and then he reneged. It was a misunderstanding. But he was sued and the housekeeper won. He was ordered to pay damages and the housekeeper’s legal costs. He refused to pay. The housekeeper’s lawyers applied to the court to enforce the judgment and Mr Pickwick was committed to the Fleet debtors’ prison where he was to remain until he paid the damages and costs. But he continued to refuse to do so and gave every appearance of being prepared to stay there until he died. The housekeeper’s solicitors had planned to receive their costs from Mr Pickwick and when this looked unlikely they claimed against the penniless housekeeper,
Policies and Procedures are extremely important but often unbearably long and incredibly dull. There is a certain satisfaction in drafting a considered policy document and keeping it up to date. But if employees do not read it until a problem arises then they may not be aware of the avoidable legal pitfalls that can cause significant loss to their employer before it is too late. In about 2007, I founded Employee Legal Awareness Day. Since then, I have made legal presentations, written articles such as Ten Legal Things That your Employees Need To Know and devised the 3 Minute "Are you legally savvy" Quiz to promote the advantages of keeping employees legally savvy. One US company proposed three tips to make the day a hit, including a Trivia Night. However, I accept that it could be a long night for employees unless the prizes were exceptionally expensive. In the last decade, policy documents appear to have substantially increased in length while remaining unappealing to an