Corporate Governance Reports

• Published date: 01 January 1995
• DOI: http://doi.org/10.1111/j.1467-8683.1995.tb00092.x
• Date: 01 January 1995

REPORTS

43

Corporate Governance Reports

Directors’ Liability

for

Wrongful Trading

The Board for Chartered Accountants in Business;

The Institute of Chartered Accountants in England

and Wales, Moorgate Place, London EC2P 2BJ,

UK,

1994

Addressed to Chartered Accountants in the

UK,

this report, nevertheless, contains valu-

able advice to all directors.

Wrong trading means continuing to oper-

ate in business when you know, or should

know, that the company should be wound

up because it can no longer meet its debts.

You can be prosecuted for continuing to

trade when you know that the company

can no longer avoid going into insolvent

liquidation. A higher standard of knowl-

edge is expected of a chartered accountant

or officer of a company than of unqualified

colleagues

-

even

if

the chartered account-

ant

is

not responsible for the financial side

of the business.

If

found guilty you can

face disqualification as a director and you

could be forced to contribute towards the

company’s assets.

If

your employer goes

out of business you have a duty to co-

operate with the appointed liquidator.

The

10

page booklet goes on to examine the

implications of the

UK

Insolvency Act

1986,

the Company Directors Disqualification Act

1986

and the Companies Act

1985,

together

with a number of judicial rulings. Predict-

ably, though, it does not resolve the dilemma,

@

Basil Blackwell Ltd.

1995.

108

Cowley Rd, Oxford

OX4

1JF

and

238

Main

St,

Cambridge, MA

02142,

USA.

faced by

so

many directors at some time in

their experience, of looking at a loss-making

business, heavily indebted and apparently

insolvent, but with a positive future forecast

by the chief executive and his top manage-

ment colleagues, and not knowing whether

there was a reasonable prospect of the com-

pany being successful in due course, paying

all its debts and eventually thriving for its

shareholders, staff and customers.

Non-Executive Director

-

A Guide

for

Chartered Accountants

The Board for Chartered Accountants in Business;

The Institute of Chartered Accountants in England

and Wales, Moorgate Place, London EC2P 2BJ,

UK,

1994

Recognising that in the

UK

around

10%

of the

directors of public companies are Chartered

Accountants, and aiming to encourage more

well-qualified members of the profession to

consider that path, this

35

page report con-

tains a wealth of common sense comment on

the main functions of non-executive direc-

tors, the experience and personal qualities

required, legal responsibilities, common mis-

conceptions about the non-executive role,

issues

of

independence and the appointment

process. The comments are based, predomi-

nantly, on the experience of the author and of

PRO NED, executive search consultants and

institutional investors.

Volume

3

Number

1

January

1995