We’ve recently seen a situation where an IP was able to put up a very vigorous defence when a director claimed to have been prejudiced by advice he was given pre-appointment, which was a timely reminder that you need to ensure that your engagement letters protect you and define the scope of your instructions.
The director, who was also a major shareholder, was a bit upset (!) to be told that he had to repay illegal dividends taken in the years leading up to the liquidation. He said that the IP should have warned him and advised him to avoid liquidation to protect him from having to repay the money. Thankfully, the IP, who knew nothing of the illegal dividends when first contacted by the director and did not even see summarised accounts until after the company had convened the CVL meetings, had a very clear statement in the engagement letter explaining that advice was being given to the company, not the directors in their personal capacity.
You should check that your engagement letters help to protect you and manage the directors’ expectations as well as covering the increasing raft of required content. As for those of you that still don’t have engagement letters for some or all of your case types…..
