Is The Director Responsible For Dissolution Of A Company

I am a director of a failing business where a few bad decisions have been made in the past. If we can confront to the dissolution conditions, which I think we will, can any creditors sue me for my personal liability or my incorrect actions?
Posted 1 year ago  | 
Corporate Law,General Legal
Corporate Law General Legal

1 Answer(s)


The Director can be made responsible if the decisions taken are against the interests of the Company, or for debt evasion.
To edify more we have a case law where, a start-up company was set up in late 2002. By August 2005 the original, substantial, external investment in the company had been used up, it had lost a major customer and its revenue was insufficient to reduce the overall losses it had built up. It was wound up as insolvent by a creditor in 2007. Later, the liquidator alleged wrongful trading because
for example:
• There was no evidence that the directors had considered the company’s worsening financial situation and its potential effect on creditors. They ought to have done so and ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation.
•The directors had not economised ― they had continued to spend money as they had previously, including paying themselves salaries and expenses. They had not taken ‘every step’ with a view to minimising the loss to creditors.The court decided they were guilty of wrongful trading from June 2005.Moreover, if you have evaded any debts and avoided any creditor’s warning then according to the newly enacted Bankruptcy and the Insolvency Code, 2016 the creditors can proceed against you legally as that of “sick company”, and the law involves quick disposal of cases within 180 days.

Get Advice From Top Experts In India