The entrepreneur as a debtor
Half of the entrepreneurs indicate that they are already having problems repaying their short-term debts. These are fixed costs such as loans, rent, taxes, social security contributions, energy bills and invoices. Due to the domino effect, one self-employed person may drag down another. Directors may be held personally and jointly liable for the established deficit of the debts if the following conditions are met:
They knew or should have known at a certain point prior to the eventual bankruptcy that there were evidently no reasonable prospects to continue the activities and that bankruptcy was inevitable;
They were a director or at least exercised actual directorial powers at that time;
They did not act as a normal and careful director would have acted in the same circumstances.
Concerned directors of companies in effective difficulties wonder to what extent they are still allowed to try to pursue a solution for the struggling company. Are they obliged towards shareholders and staff to consolidate that one potentially very profitable deal or opportunity? Will they be liable or not?
Frequently asked questions for entrepreneurs as debtors
If he knew or should have known that bankruptcy was inevitable, yet did not act as a normally prudent director.
It means that each director involved can be sued to make up the entire deficit personally.
Yes, as long as he acts as a normal and prudent manager and does not take reckless decisions.
Yes, if that decision was unreasonable or ill-considered and led to further harm, it may give rise to liability.
We advise on risk mitigation, liability and assist directors throughout the insolvency process.
