Island Life Magazine Ltd April/May 2010 | Page 155

island business Island Life - April/May 2010 Trading while insolvent By Esme Shakeshaft Moore Stephens Accountants Tel: [phone] A successful weekend The first signs of Spring could be spotted at Bayliss & Booth, with planters outside full of cowslips, tête a tête and primroses. After months of searching and sourcing the Spring Season was officially launched at their Spring Event Weekend. Hundreds of new items included their traditional antique French furniture, garden furniture, bespoke kitchen pieces, new fabric ranges, handmade rugs and lots of inspirational gifts and accessories, as well as Easter nibbles and sparkling blanc limé. . ‘The atmosphere was great with lots of fantastic comments. We enjoy launching every season with an event, otherwise the year simply seems to whizz by’ said Peter and Carole Lambert. Tel: [phone] NEFF Cooking Demonstration Moreys offer a comprehensive range of quality Neff appliances to compliment their exciting new range of kitchens from Charles Rennie Mackintosh. From Circosteam Combination Ovens and Warming Drawers to Coffee Centres and Induction Hobs, Neff continue to introduce breakthrough products and kitchen concepts that incorporate the very latest technology. Visit Moreys, Trafalgar Road on Friday 14th May between 2 and 4pm and Saturday 15th May between 9am and 12 noon to see live demonstrations and learn more about cooking the NEFF way. Visit our new website - www.visitislandlife.com If you would like guidance please get in touch [email protected] Trading through the recovery period after a recession, with over-trading being one of the key risks, could be a real challenge to managing cashflow and so threaten the solvency of a business. Directors must regularly monitor their financial position and act with great care if their company appears to be getting into financial difficulty. Under the Companies Act 2006, directors have a general duty to act in a way most likely to promote the success of the company for the benefit of its members. Where a company becomes insolvent, their duty is modified so that directors must consider the interests of creditors. Although trading while insolvent is not technically illegal, directors can be prosecuted for wrongful trading. Wrongful trading arises where a director knew or ought to have known there was no reasonable prospect of the company avoiding insolvent liquidation. Directors may be liable to compensate creditors for any loss where wrongful trading is deemed to have taken place. To avoid liability, directors must be able to demonstrate how they took every reasonable step possible to minimise the potential loss to creditors. There is a separate offence of fraudulent trading, where deliberate fraud (rather than negligence or incompetence) results in insolvent liquidation. Successfully prosecuted directors can face prison, as well as liability for company debts. If you are a director of a company that may be getting into financial difficulty, you should: • Speak to your trusted adviser; • Monitor the company’s financial position closely; • Keep comprehensive minutes of commercial decisions taken xxand the consideration given to creditors’ interest; • Seek specialist advice from an insolvency practitioner fast; • Consider initiating a formal insolvency procedure if there xxis no reasonable prospect of the company avoiding insolvent xxliquidation. Otherwise, document any decision to continue to xxtrade; • Avoid selling assets and preferencial settlement of xxcreditors; and • Overall, act in the best interest of the creditors. 155