It is easy to incorporate a company. With modern technology one can incorporate a company, be appointed as its director, and allocate shares within the time it takes to drink a cup of tea.
However, such ease belies the very real and serious obligations that are incurred upon appointment as director.
A director owes certain duties of care as an officer to the company. The Companies Act 2006 at sections 170 to 177 set out the scope of director’s obligations to the company. In summary, a director should act within the best interests of the company.
Where an Insolvency Practitioner forms the view that a director has behaved in such a way that the best interests of the company have not been pursued, and losses occur, court proceedings may be issued.
The liquidator or administrator will be seeking an Order of the Court that the former director pay, restore, or account for any money together with interest that is determined by the court.
The power of an Insolvency Practitioner to pursue these proceedings is set out in section 212 of the Insolvency Act 1986. The IP must be able to misfeasance on the part of the director.