Liquidations – issues for the directors to consider in the run-up to a liquidation

If you are a director of a business that goes into liquidation, what areas of your behaviour comes under scrutiny:
1. Were any of the directors involved in a liquidation before?
2. Is the company holding deposits from customers which are now potentially going to disappear in a liquidation?
3. How much is Revenue owed, both in cash terms and in relation to the overall debts of the company. Did the debt accumulate over a period of time, and if so were proper returns filed by the company?
4. Did the directors give preference to one group or class of creditors over another?
5. Did the directors continue to run up further debts after they realised the company was insolvent? Once the directors realise the company is insolvent they should aim to pay off suppliers as they are incurred i.e. pay suppliers as ‘new’ goods and services are delivered. They should manage the business in such a way as to minimise the effect on all third parties that could be affected by the liquidation.
6. Were the employees treated correctly? Did they get P45s and were they paid all their entitlements including holiday pay and redundancy, if applicable.
7. Did the directors gain personally from the liquidation of the company? For example did they owe the company money as at the date of the liquidation.
8. Is the company’s debt at an all-time high in relation to their historic levels of debt?
9. Are the directors starting a similar business?
10. Did the company file statutory returns on time with Companies Office and Revenue?

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