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
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.
