Exisiting director going bankrupt, implications of my becoming the director

[desk2web]

Hi everyone,

I find myself in a situation which needs advice, and what better place to find it. Basically I am an employee within a company, said company is owned by an individual who owns a number of other companies. That individual is now potentially going bankrupt, as our company is the only one viable he (and I) are worried that everything in our company will go once he is declared bankrupt.

Question is this, if he removes himself from the company as a director, and I become a director, will this leave the company safe (in terms of bankrupcy).

What are the financial implications on me as an individual becoming a director and - hopefully not - this company going down the pan?

Hopefully this thread makes sense, I've typed it quickly having just come off the phone to our boss!

Thanks in advance for any guidance.

[mahutchinson]

Your boss would not be able to act as a director while bankrupt and this is the reason he would need replacing. There should be no financial implications on you personally in taking the position unless you take some unlawful action. You would also want to be happy that no such action has been recently taken by the current director. There are of course all the many and varied obligations and responsibilities of a director as set out in the Companies Act including filing of accounts and returns etc, keeping accounting records and statutory registers and any responsibilities connected to the particular industry you are in (licences, registrations etc. for example). You will be, basically, fully responsible for everything that happens in the company and every decision taken.

If the your boss is the owner of the company then it is an asset of his.

[mahutchinson]

I ran out of time on the previous post. The company would therefore be an asset of your boss and presumably would be liable to be wound up so that the assets could be distributed to creditors. Form this point of view you would clearly not wish to get involved as the replacement of the director would not stop this happening and would be pointless. Perhaps an insolvency guru could expand on this ?

[Dave Shaw]

Mike Hutchinson is correct - once bankrupt the assets will vest in the Trustee and will be realised or disposed of. If there is value to the business then they would look to sell on the open market or back to your boss (obviously he would have to find the funds elsewhere as he is bankrupt). Failing this they would arrange for it to be wound up and any surplus funds paid into the bankruptcy.

If it sold to another party then they will probably want to control who the directors are.

As Mike says your boss will be unable to act as director whilst he is an undischarged bankrupt unless he seeks approval from court.

In terms of your position if you accept the directorship you will obviously have the normal director's repsonsibilities and liabilities. I would also be careful that this is not just an agreement of convenience with your boss continuing to make the decisions in the background. If he is he may still be committing an offence by acting as a shadow director and this could have implications for you.

If you do decide to take the role ensure that you are fully aware of what you are getting yourself into - make sure you know what the company's financial position is and the relationships with the other entities.

Dave