This chapter considers directors’ liabilities on a company going into insolvent liquidation or administration. Redress for breach of duty by directors is mainly a matter for liquidators and administrators who can pursue a variety of options. The common measures are considered in this chapter: misfeasance claims (IA 1986, s 212); claims for fraudulent trading (ss 213, 246ZA); and for wrongful trading (ss 214, 246ZB). It is possible also to challenge certain past transactions, for example, as transactions at an undervalue (s 238) or preferences (s 239). The chapter also considers the grounds for disqualifying a director which commonly is a consequence of insolvency. The case law concerning unfitness to be a director is considered and the nature of disqualification orders and undertakings is addressed as well as the scope for seeking a compensation order.
Chapter
15. Directors’ liabilities and vulnerable transactions on insolvency
Chapter
14. Torts
A claim for damages for loss caused by a public authority gives a court the opportunity to do justice for the claimant and also to impose the rule of law on the administration. The challenge is to do both without interfering inappropriately in the administrative pursuit of public goods, and without creating public compensation funds that only a legislature can legitimately create. It is an important constitutional principle that liabilities in the law of tort apply to public authorities, just as to private parties. But there is no general liability to compensate for public action that was unlawful; the impugned conduct must meet the standard requirements of the tort liability of private parties, with the exception of the one public tort: misfeasance in a public office. This chapter discusses trespass to property, statutory liabilities, negligence, misfeasance in public office, and damages under the Human Rights Act 1998.
Chapter
15. Directors’ liabilities and vulnerable transactions on insolvency
This chapter considers directors’ liabilities on a company going into insolvency. Redress for breach of duty by directors is available through summary action for misfeasance (IA 1986, s 212), fraudulent trading (ss 213, 246ZA), and wrongful trading (ss 214, 246ZB). The scope of these provisions is considered in detail together with the relevant case law. Wrongful trading is potentially a valuable remedy but it is somewhat underused. It may be advantageous instead to challenge certain transactions by the directors prior to insolvency; for example, as transactions at an undervalue (s 238) or preferences (s 239). More broadly, the overall conduct of the directors is reviewed in order to determine whether disqualification is appropriate on the grounds, usually, that they are unfit. All of these matters are addressed in this chapter.
