What is a cross directorship?

A cross directorship is the term used to define when the director of one company is also the director of another company or companies. Often, creditors are unaware that the director of a company who they are doing business with, is also the director of one or multiple companies elsewhere.

How does CreditorWatch’s Adverse Cross Directorships feature work?

When the director of a company you are monitoring has an adverse action registered against another one of their companies, you will receive an email alert. Changes include court actions, payment defaults, insolvency notices, mercantile enquiries and status changes.

Why is it important to be aware of cross directorships?

Some cross directorships can pose a risk to your business. When the director of a company you are monitoring has an adverse action registered against another one of their companies, this can indicate you may eventually feel the effects of that action. Past and present director behaviour is a great indicator of the future of a business. Here are a few things to consider:

  • A director with a payment default is 5 times more likely to experience another one

  • A director with a court action is 2 times as likely to have another one

  • A director with a failed business is 2 times more likely to fail again

Aside from the statistics above, there are other points to consider. If one of the worse case scenarios occurs and a director becomes individually bankrupt, they can slip through the cracks and still operate even though it is illegal to do so. This can often be flagged with slight name and address changes. If there have been insolvencies and the director sets up other companies afterwards with slight changes, this could also be an indication of illegal phoenix activity.

By monitoring directorships, you are empowered with knowing the full picture. Identifying cross directorships can show a visual and clear idea of who you are dealing with. Adverse data and the statistics above provide a clear warning that adverse actions can happen again if they have already occurred. Whether it happens again with the company you are dealing with or if you eventually experience the flow on effect with late or missed payments, it’s a good idea to have an understanding of where you stand with this customer so that you can take action and make a plan to mitigate risk.

Stay on top of risk and never miss an important change. Speak to your account manager about Adverse Cross Directorships or inquire with CreditorWatch today!

More resources:
Adverse Cross Directorships
How to perform director due diligence

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