Q&As

Can a company carry on trading legally if it is insolvent?

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Published on LexisPSL on 01/02/2017

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • Can a company carry on trading legally if it is insolvent?

Can a company carry on trading legally if it is insolvent?

When a company is solvent and has no financial concerns, broadly speaking the company and its directors owe fairly limited duties to creditors. However, when a company is insolvent, or is verging on insolvency (the insolvency point), there is a shift in the directors’ duties. The shift moves the directors’ primary duties away from the company’s members and towards the company’s creditors as a whole (the insolvency duties). Breach of those duties can result in personal liability for that director, or disqualification, and in

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