I Appointed A Liquidator And Now They Are Threatening To Sue Me, What Do I Do?

As a director, the responsible and legally sound step to take when your company is insolvent is often to commence the liquidation of the company. 

Once you have been through the difficult process of accepting this, you will choose an insolvency practitioner to deal with the liquidation.  This may be via a recommendation from your accountant, a friend of a friend, or from research you carry out online. 

You may choose someone based on price, or a rapport that you develop with them during or after an initial conversation. 

Several months later, you will have provided all of the necessary basic information and may well be moving forward with your life and a new business. 

It may then feel like a bolt from the blue when you receive correspondence from the liquidator or lawyers they have instructed, threatening court action against you. 

This is often based on an initial investigation the liquidator and their staff will have conducted. They will have concluded that there is a possible claim against you. 

Such a claim may range from an overdrawn director’s loan account, to a more technical claim such as a preference claim under section 238 of the Insolvency Act 1986 or wrongful trading under section 214 of the Insolvency Act 1986. A useful summary of the various claims that can arise can be found here Directors investigations: what are they? - Business Rescue Experts 

The first point to realise is that this is nothing personal, and the liquidator is doing their job. They are obliged to follow down on this sort of issue. 

The second point is that sometimes busy liquidators get these sorts of claims wrong. At the very least they may overstate the claim. They may have had poor advice on the structure and viability of the claim. Equally, they may be spot on and the claim may be indefensible. 

Upon receipt of the intimation of such a claim, many directors either freeze or go into fight mode. 

Neither of these responses are particularly helpful. 

An absolute must is to get advice as quickly as possible from an experienced advisor. 

The wrong advice or approach in this situation can make matters much more difficult and in the long run cost significantly more. 

At TRE, we have accumulated 55 years of experience in dealing with claims against directors, from both sides of the coin. TRE can provide a fixed fee service and review the claim to give you much needed certainty on where you stand and what your next steps should be. We understand the drivers for all parties and will provide calm and focused advice so you can move forward with confidence and precision.  

At TRE, our focus is on strong director protection, and we are highly experienced at assisting directors who may need support.