DIRECTOR DISQUALIFICATION: CORPORATE INSOLVENCY AND BANKRUPTCY OF A COMPANY
If an insolvent corporation gets on into an administration or liquidation then the directors can be sued in their capacity for losses made by the creditors. If he continues to trade after the insolvency then it may lead to a big loss and even shut down of the organization occurs. The liquidator or an administrator will make an announcement to the insolvency service. Insolvency Service is an agency of the department for business, energy, and Industries Strategy (BEIS) and they bring director disqualification proceedings. Assets of the company are placed under the control of the liquidator who is a qualified insolvency practitioner. A company in liquidation ceases to trade immediately on being will be placed in liquidation.
Insolvency resolution process function-
Under the Insolvency and Bankruptcy Code, 2016, the insolvency resolution process (IRP), a provisional resolution experienced person is appointed with the power to take charge of the company which has bankruptcy and insolvency. The appointed professional task is to put up with the necessary steps to revive the company. He/she has all the power to raise fresh funds to continue processes. Corporate Insolvency Resolution Process (CIRP) is been initiated by (NCLT) National company law tribunal. When a company defaults on making payment to creditors then CIRP is taken. In the case of the housing project, after amendment in the code, a home buyer can also approach NCLT for initiating IRP if a developer fails to furnish possession of the house or refund the money he would be punished under the law.
Conclusion: A director’s duty in facing, corporate insolvency, should owe both statutory and fiduciary duty to act in the company’s best interests. As we all know that a company is owned by its shareholders, this duty is owed to the shareholders mainly. If a company is insolvent or even is on the verge of insolvency, the director’s duties shift from a duty to its shareholders to a duty to its creditors. When a company is wound up, the assets of the organization will be distributed amongst its creditors.
