The Boardroom · 5-Minute Read
Director Liability: What Boards Underestimate
Alexandra KernPartner, Insolvency & RestructuringDecember 2025
Directors of a company approaching insolvency face personal exposure that many boards underestimate until it's too late to manage well.
Wrongful tradingDirectors can be personally liable if the company continued trading after the point they knew, or ought to have known, insolvent liquidation was unavoidable — and 'ought to have known' is a lower bar than most directors assume.
The practical defenceContemporaneous board minutes evidencing genuine consideration of the company's financial position are the single most effective protection. Reconstructed reasoning after the fact carries far less weight.
Boards navigating financial distress should treat documentation as a live governance discipline from the first sign of difficulty, not a task to complete once insolvency has already become likely. By then, much of its protective value has already been lost.