Forming a company is an excellent way for business owners to avoid personal liabilities arising in the running of their business. However, the protection afforded is not absolute.
A business may enter into a number of transactions which could place its directors at risk of personal liability if those transactions are not considered carefully.
Conventional and lawful transactions such as asset sales, share buy-backs and settlement arrangements can be identified in retrospect as unlawful if they were found to prejudice the interests of creditors. If so this might have disastrous personal consequences for any directors who may have sanctioned these transactions.
In the recent case of Dickinson v NAL Realisations (Staffordshire) Limited  EWHC 28(Ch) an owner of a business / director was personally required to pay damages to creditors after the court found that a number of transactions he had entered into, including a share buy-back and a sale of property, had unfairly obstructed their interests.
If a director has any concerns regarding a prospective transaction, it is essential that legal advice is obtained, and in the case of a director being accused of prejudicing the rights of creditors, it is essential that legal representation is arranged from lawyers with suitable expertise. Need to know more? See our pages on business law.
In either case, rhw are the right lawyers for you.