Liquidators Action Against Directors
Liquidators Action Against Directors
When companies face winding up proceedings for unpaid taxes, HMRC is increasingly appointing private insolvency firms to act as liquidators rather than relying on the Official Receiver. This shift in approach has significant implications for company directors.
Private insolvency firms appointed by HMRC may be more inclined to pursue personal claims against directors in order to recover funds for creditors, including HMRC itself. Directors may face personal misfeasance claims brought by the liquidator, alleging failures in the performance of their directorial duties.
These claims typically arise from allegations that directors failed to act in the best interests of creditors when the company was insolvent, continued trading when they knew or ought to have known that the company could not pay its debts, or failed to maintain adequate financial controls.
Given these risks, it is generally advisable for directors to consider proactively arranging the company’s liquidation rather than allowing HMRC to control the process and select the liquidator. By taking the initiative, directors can appoint a liquidator of their choosing who will conduct the process fairly and without a predetermined agenda.
CTM can assist directors in appointing preferred liquidators and navigating the liquidation process. Taking early action can make a significant difference to the outcome for directors and may help to avoid or mitigate personal liability claims.
Frequently asked questions
Who does HMRC appoint as liquidator when winding up a company?
When companies face winding up proceedings for unpaid taxes, HMRC is increasingly appointing private insolvency firms to act as liquidators rather than relying on the Official Receiver. Those firms may be more inclined to pursue personal claims against directors to recover funds for creditors, including HMRC itself.
What claims can a liquidator bring against a director?
Directors may face personal misfeasance claims alleging failures in the performance of their duties. These typically allege that directors failed to act in the best interests of creditors when the company was insolvent, continued trading when they knew or ought to have known it could not pay its debts, or failed to maintain adequate financial controls.
Can directors choose the liquidator instead of HMRC?
Directors can consider proactively arranging the company's liquidation rather than allowing HMRC to control the process and select the liquidator. By taking the initiative, directors can appoint a liquidator of their choosing who will conduct the process fairly, and early action may help to avoid or mitigate personal liability claims.
