Article - Civil/Commercial Litigation

Our suppliers have breached the contract they have with us and we want to take action against them. Must the company sue the suppliers or can the directors sue on the company's behalf?

If a contract was entered into between your suppliers and the company, then proceedings must be commenced in the company name. If your company is trading under another name then it may be described as A Limited trading as XYZ.  

Please note that if the company is run by a board of directors, one director alone cannot institute proceedings on behalf of the company. The decision must be made by the board collectively.

If your company is in liquidation, you can only sue through the liquidator, although the company is still referred to in the proceedings by its own name. This is also the case if your company is in receivership or administration.

Litigation is expensive. Must our company instruct lawyers to represent us in court if our claim proceeds to trial?

In 1998 the Civil Procedure Rules (CPR) drastically changed the way litigation is conducted. Until the implementation of the CPR, it was normal for companies to use lawyers to pursue a claim through the court. However, (sadly for lawyers) your company can now be represented at trial by one of itís employees if:

  • the particular employee is authorised to represent the company at the trial
  • the court gives permission for that employee to represent the company at trial.

I am the director of a company that may have been trading whilst insolvent and I am concerned about my personal position. What can I do?

You could potentially be personally liable for any debts the company incurs after you became aware it was insolvent. You could also be disqualified from acting as a director for between two and 15 years.

To try and avoid either of these scenarios, you should do some or all of the following:

  • obtain independent financial advice if you have any concerns about the financial viability of the company
  • make sure the company has up-to-date financial information. If management accounts have not been prepared, they should be done on a weekly or monthly basis
  • report any concerns you have about the financial state of the company to the other directors as soon as possible. If your concerns are raised at a board meeting, they should be properly recorded in the minutes
  • if you believe the company should not be incurring further credit, because it cannot pay either trade or Crown debt, recommend to your co-directors that the company stops trading
  • if the other directors wish to carry on trading, consider resigning as a director
  • if the company cannot pay its debts recommend to the board that they seek an insolvency practitioner
  • alternatively, consider taking out professional liability insurance cover, although if the company is already suffering financial problems, it is probably too late.

Article First Published: 25 January 2004


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