On liquidating a company, the insolvency practitioner appointed as liquidator must produce a report on the general conduct of the directors who have been responsible for running the business. This is called the directors disqualification report or D1 report.

The liquidator is required to report on any person who has acted as a director of the company for the past three (3) years or any person who seems to have acted in the capacity of a director although they may not be formally registered as such at Company’s House.

Wrongful Trading

If the liquidator finds that any director has knowingly allowed the company to trade while insolvent, then they could accuse the director of wrongful trading. If upheld, this could lead to the director being struck off of the register of directors and banned from being a director for up to 15 years.  

The director may also be held personally responsible for company debts incurred during the time that the director was aware that the company was trading when insolvent.

In the case of a member’s voluntary liquidation, it is unusual for a director to be accused of wrongful trading as by definition, the business is not insolvent. However, if during their investigation, the liquidator found that the company was actually insolvent, the process would be changed to a creditor's voluntary liquidation. There may then be a risk of wrongful trading.