Nxt Manchester — Jan./Feb. 2009 - (Page 21)

the directors had stopped trading immediately, then the directors could find themselves personally liable for any such worsening.” Paul said the directors can be found liable for fraudulent trading if they carry on trading and incur credit after they know or should know that the company cannot avoid liquidation. This situation sometimes occurs when the directors try to recklessly trade out of an insolvent situation, without caring about creditors. They can even be considered fraudulent if they have the intention of reducing another personal liability. “Once you are insolvent, the only real defense to an accusation of wrongful trading is that you had a forecast that showed the position of creditors improving and that the forecast was carefully monitored on at least a monthly basis,” advised Paul. Of course, this presupposes that the company has a means of producing meaningful forecasts. It also presupposes that a management information system that is capable of producing meaningful management accounts. Unfortunately, Paul sees so many companies that don’t have such a capability— including companies turning over several million pounds. Under the Companies Act, companies need to have proper books of account. This means anyone should be able to tell the state of a company at any point in time. If this has not been implemented then companies could also be liable for other Companies Act offences. If an adverse report is made on the directors to the Department of Business Enterprise and Regulatory Reform then a director could find himself disqualified from being a director of any company for a number of years into the future. PROFILE “Once you are insolvent, the only real defense to an accusation of wrongful trading is that you had a forecast that showed the position of creditors improving and that the forecast was carefully monitored on at least a monthly basis.”

Table of Contents Feed for the Digital Edition of Nxt Manchester — Jan./Feb. 2009

Cover Contents Editor's Notes Nxt Challenge MediaCityUK 2009 - The Vision The Lowry Hotel Nxtbook Stateside Nxtbook Europe Colin's Spinning Jenny Puts Manchester on the New Media Map Personal Liability Shock in Store for Insolvent Directors Key Tips to Generate Web Site Revenue Economy: Business Rescue Taxman Drives a Hard Bargain on Travel Expenses Server-Hosting Sector Goes Green Don't Let the Credit Crunch Affect Your Health The Changing Face of Manchester Salford University Appoints MediaCity Director Century Turns Real Nxt News Events

Nxt Manchester — Jan./Feb. 2009

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