Directors of failed companies whose actions are deemed by the Insolvency Service to have fallen short of acceptable standards may now be subject to a Court order to pay compensation out of their own pockets to creditors of the limited company.
Since 1 October a procedure has been in place for the Insolvency Service to apply for a compensation order when applying for a disqualification order. Directors are to be informed of the Insolvency Service’s intention to apply for such orders.
Any monies recovered from the director can either be a contribution to the assets of the company or paid directly to the creditors by a Secretary of State.
Directors can, as with disqualification orders, provide a compensation undertaking, however he can, at a later date, apply for a variation to that order and have the amount reduced or even cancelled.
The compensation regime is supposed to ensure that directors take financial responsibility for their actions.
It is important for anybody facing financial difficulties, whether personally, directors of limited companies or partnerships, to seek advice from a licensed insolvency practitioner as soon as possible.
For more information on bankruptcy, liquidation, administration and all the other insolvency procedures, or to take advantage of our free consultation, please telephone Stella Flemmings on 01377 257788, 01724 230060 or 01904 250116 and she will make you an appointment with one of our insolvency professionals at our Driffield, Scunthorpe or York offices.
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