20.1 INTRODUCTION
Whenever a company does a distribution it is actually critical for the company to comply with the solvency and liquidity laws as this is a high-risk area for the directors and the company. If the correct procedures are not carried out there are going to be numerous claims and the directors can in fact be sued. This could very well be an issue for the accounting firm that does the company secretarial work if the directors do not comply with the legislation. The company may not even know about the legislation and make a distribution without the proper procedures, which could make them personally liable if something goes wrong.
In the previous section we discussed distributions. Where a distribution is carried out the directors must perform a solvency and liquidity test and where the director’s lack the knowledge of what is required the accounting firm must be in a position to guide them or undertake the work on their behalf.