Actions against company directors

We assist directors defending claims brought by liquidators and assist creditors recovering amounts from companies placed into liquidation. A creditor having been defrauded is able to bring a claim against a director.  We are uniquely placed as we do not act for insolvency practitioners or liquidators.  This ensures that there is no possibility of a conflict of interest arising especially as many solicitors in this area represent insolvency practitioners and liquidators.

A liquidator is appointed by either the court when a company has been wound-up or by the shareholders or creditors of a company who wish for the company to be placed in liquidation.  As part of the liquidation process, the officers of the company, including directors, are under a duty to cooperate with the liquidator. A director has various duties to perform and may be made liable for some of the following:

Fraudulent trading:  A director may be pursued for fraudulent trading (section 213 IA 1986). The court may then require the relevant persons to make contributions to the company’s assets as a result.

Wrongful trading:  The liquidator may proceed against a director if it appears that a director knew or ought to have known that there was no reasonable prospect of avoiding liquidation and has continued to trade (section 214 IA 1986). This focuses on mismanagement of the company and allows the court to order a contribution to the company’s assets as a result.

Transactions defrauding creditors:  The liquidator may apply to the court in cases where a gift has been made or there has been a transaction at an undervalue that has defrauded the creditors by placing the company’s assets beyond reach of a creditor (section 423 IA 1986).

It should be noted that these powers are complemented by numerous criminal offences provided by the Insolvency Act 1986. The liquidator must inform the Secretary of State if it appears that an offence has been committed (section 218 IA 1986). A director can be held liable for fraudulent and wrongful trading as well as being held criminally liable (section 215(5) IA 1986).

Please contact us if you are a creditor wishing to be paid by an insolvent company or a director in need of advice.