Insolvency investigations

During formal insolvency appointments office holders have a duty to investigate if assets have gone missing and whether there are claims and potential recoveries that can be made using their extensive powers to investigate and carry out forensic accountancy into the insolvent company’s affairs.  

Investigations

Our UK marketing leading specialist team of experts focusses on contentious insolvency and fraud investigations.  We can investigate transactions undertaken by the company in the period leading up to its insolvency to bring about action and pursue claims including:

• Breach of duty and misfeasance - where directors cause their company loss
• Preferential treatment of creditors – when one creditor is repaid in preference to others
• Transactions at an undervalue – when asset(s) are sold for less than their true value
• Wrongful trading – directors can be made personally liable if their company incurs additional liabilities after there is no realistic prospect of avoiding insolvent liquidation
• Fraudulent trading – if directors were involved in any fraudulent activity

We deal with enforcement actions and asset tracing working with legal advisers and forensic experts to recover assets and bring claims against those who are accountable.  Additionally, we assess whether any action should be brought against the company’s current or past directors in order to recover value for the benefit of the company’s creditors and/or shareholders. 

Director misconduct

When a company enters compulsory liquidation investigations into director misconduct are carried out by the Insolvency Service.  Other formal insolvency procedures can also trigger investigations if director conduct comes into question.  Reasons for investigation by the Insolvency Service could include:

• Failing to put creditor interests first during insolvency
• Knowingly causing creditors loss
• Failing to pay HMRC tax and National Insurance liabilities
• Not co-operating with the insolvency practitioner during their investigations

Directors can be disqualified from being involved in the formation or running of a company for up to 15 years and could be liable to pay compensation to creditors if they have suffered a material loss.

Anybody can report misconduct relating to the conduct of directors of companies that have entered into formal insolvency procedures.  The Insolvency Service has powers given to it by law to consider such complaints.

Sections 235 and 236 of the Insolvency Act 1986

Section 235 of the Insolvency Act 1986 enables an Insolvency Practitioner (office holder) to obtain information from an insolvent company’s former officers or agents who hold information relevant to the company’s financial affairs – this section is mandatory, and all officers have a duty to cooperate – this includes an obligation to attend meetings and interviews with the Insolvency Practitioner. 

Failure to co-operate could lead to the Insolvency Practitioner exercising his/her powers under Section 236 (below) in order to seek attendance of the relevant person before a Court.

Section 236 of the Insolvency Act 1986 allows an Insolvency Practitioner to summon to court any person who may be able to provide him/her with information or records concerning the company’s affairs.  These sections mirror the well known multi jurisdictional bankruptcy provisions and allow office holders to conduct extensive investigations into the insolvent company’s affairs.

Call our UK market leading highly experienced specialist investigations team today to discuss your specific concerns or to arrange a confidential consultation on 0800 331 7417