When a company enters liquidation, the role and responsibilities of a company director shift significantly. Understanding these obligations is crucial for compliance with legal requirements and to minimise potential personal liabilities. Here are key obligations of a company director during the liquidation process: 

1. Cooperation with the Liquidator 

• Provide Information: Directors must provide the liquidator with complete and accurate information about the company’s business, property, affairs, and financial circumstances. 
• Assist in Recovery: Assist the liquidator in recovering assets, including identifying and locating assets, and providing any relevant documentation. 

2. Cessation of Company Operations 

• Stop Trading: Directors must cease the company’s operations and trading activities unless the liquidator authorises certain operations to continue for beneficial reasons. 

 3. Protection of Company Assets 

• Safeguard Assets: Ensure that all of the company’s assets are protected and handed over to the liquidator. This includes both physical assets and intangible assets like intellectual property. 

4. Financial Affairs Disclosure 

• Financial Records: Provide the liquidator with the company’s books and records. This is critical for the liquidator to understand the company’s financial position and history. 
• Disclosure of Affairs: Prepare a statement of affairs, a detailed report that includes assets, liabilities, creditors, and other financial information. 

5. Legal Compliance 

• Adhere to Laws: Comply with legal requirements under the Corporations Act 2001 and other relevant laws. This includes obligations related to insolvent trading, preferential payments, and fraudulent behavior. 

6. Avoiding Conflict of Interest 

• Conflict of Interest: Directors must avoid actions that could lead to a conflict of interest with their role or could be seen as favoring certain creditors over others. 

7. Insolvent Trading 

• Prevent Further Debt: Directors should not allow the company to incur further debt, understanding that the company is insolvent and unable to repay its debts. 

8. Attendance and Communication 

• Meetings and Correspondence: Attend meetings and respond to correspondence as required by the liquidator. This may include meetings with creditors or interviews with the liquidator. 

9. Personal Guarantees and Liabilities 

• Address Personal Guarantees: Be aware of and address any personal guarantees given for company debts. Directors may be personally liable for these debts. 

 10. Future Conduct 

Restrictions on Directorship: Directors who have been involved in companies that have gone into liquidation may face restrictions on managing companies in the future. 

The liquidation of a company places significant responsibilities on its directors. It’s crucial for directors to understand these obligations and to act in accordance with the law to ensure a fair and orderly liquidation process. Non-compliance can lead to legal consequences, including personal liability. Therefore, directors are often advised to seek legal and accounting advice during this challenging period. 

One thing to remember is that the liquidator does not work for you, they control the company and it is their decision on how things are done.