Director of a business in financial difficulty?
With the recent closures of Wilko stores, we have some dos and don'ts for directors of a business in financial difficulty.
When Wilko entered administration in August 2023, it not only marked the end of the largest privately owned retailer in the UK but served as a warning to directors across the country that companies of all sizes can face financial distress for a variety of reasons.
In such invariably stressful situations, directors can end up making decisions which may make matters worse, both for the company and themselves personally, even if the effects are not immediately apparent.
This article aims to provide directors with a list of the most important ‘Dos’ and ‘Don’ts’ in the event that their business should encounter financial difficulties.
- Be mindful at all times of your legal duties as a director.
- Hold regular board meetings, recording the reasoning behind crucial decisions.
- Regularly review the company’s financial position and plan accordingly.
- Maintain accurate books and records.
- Communicate with stakeholders.
- Seek professional advice from accountants, solicitors, and other professional advisers at an early stage.
- Incur further liabilities needlessly.
- Permit transactions which are of little or no benefit to the company or its creditors.
- Ignore pressure from unpaid creditors.
- Delay in raising matters of concern with fellow board members.
- Resign without good reason for doing so.
- Do nothing!