In this episode of our Take 10 podcast, Julie Engwirda and Ian Mann discuss directors’ duties and obligations where a company is experiencing financial pressure.
Key Takeaways:
- 2020 has seen the global economy affected in unprecedented ways. With major loss of revenue, global stock market crashes, and millions of jobs affected, directors across all sectors are having to reassess their businesses and plan for an uncertain future.
- Directors will need to adapt to the changing landscape to ensure survival of their businesses, with an emphasis on maximising cash flow whilst minimising expenses.
- Having cash flow issues does not necessarily mean a company is insolvent. Many common law jurisdictions give statutory guidance to directors when considering solvency issues.
- When directors know or ought to know that the company is, or is likely, to become insolvent, they owe duties to creditors (instead of shareholders).
- Risks:
- BVI: insolvent trading.
- Cayman Islands: fraudulent trading.
