FAQ - Liquidations

Define insolvency? What are the potential consequences? Should I appoint a liquidator?

You should appoint a liquidator if your company is insolvent. There are two definitions of insolvent - one is where the company is unable to pay its debts as they fall due, the second is where the liabilities of the company exceed the company’s assets. If a company is insolvent the directors need to seriously consider their actions. You need to be extremely careful in managing companies which are in financial difficulties. In certain circumstances:

  • Limited liability many be revoked and Company Directors can be held personally liable for the company’s debts.
  • The Director of Corporate Enforcement may disqualify you from acting as a Company Director.
  • The Director of Public Prosecutions may take criminal proceedings against a Company Director.


Due to such very serious consequences, if a Director finds that he/she is unable to pay debts as they fall due he/she should seek advice from a helpful professional, preferably an insolvency specialist, as soon as possible. 

How is trading while insolvent viewed? 

The establishment of the Office of the Director of Corporate Enforcement has now ensured that the conduct of all Directors in every insolvent liquidation is now closely examined. This crackdown has encouraged Directors to be more vigorous in trying to rescue their companies from Liquidation. This in turn has encouraged more Directors to risk trading whilst insolvent. Directors may ultimately be exposed to personal liability for the company’s debts and to restriction / disqualification. If a company is insolvent, and the Directors decide to continue trading, then they may be held personally liable if they are knowingly a party to the carrying on of the business in a reckless manner. However, cases, show that reliance on professional advice (from an insolvency & liquidation practitioner for example) can be a mitigating factor in determining whether a restriction / disqualification order should be made. In certain circumstances, SEOIGE O'FAOLAIN & Co would be willing to argue, it may have been reasonable for the directors to take the view that the company could trade out of its financial difficulty. SEOIGE O'FAOLAIN & Co have consistently held the view that the conduct of the directors should not be assessed with the benefit of hindsight. In certain circumstances, the courts have been persuaded to concur with this position. 

What are some simple Do’s & Don'ts? 


  • form an understanding of the Company's position;
  • build a picture of the company’s assets and liabilities;
  • prepare profit and loss and cash flow forecasts;
  • have regular meetings and take minutes of any decisions made;
  • be honest with yourself, your employees and your creditors;
  • most importantly seek professional insolvency advice;


  • think your problems will go away if you do nothing about them;
  • take deposits for any work which you may not be able to complete;
  • receive orders for goods which you may not be able to pay for;
  • ignore any legal proceedings;
  • pay any creditor in preference to another.

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