Duty to keep books and records - presumption of insolvency
A director must cause a company to maintain adequate financial records to correctly record and explain the transactions of the company and its financial position.
If a director fails in this duty, and adequate books and records are not kept, and the company is later placed into liquidation, it may be presumed the company was insolvent for the period of time that adequate records were not maintained.
This situation makes liquidator's claims against a director easier as where books and records were not maintained, the presumption of insolvency arises.
If a director wishes to defend an insolvent trading claim brought by the liquidator in circumstances where books and records were not maintained, it is up to the director to prove the company was in fact, solvent.
