ICC JUDGE BARBER HANDS DOWN A DECISION WHICH CONSIDERED, FOR THE FIRST TIME, THE QUESTION OF WHAT DIRECTOR’S DUTIES SURVIVE THE INSOLVENCY OF A COMPANY.

On 21 January 2020 ICC Judge Barber handed down a decision which considered, for the first time, the question of what director’s duties survive the insolvency of a Company.

 

Judge Barber held that ‘the duties owed by a director to the company and its creditors survive the company’s entry into administration and voluntary liquidation. Those duties are independent of and run parallel to the duties owed by an administrator or liquidator appointed in respect of the company.’ 

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The most obvious effect of this decision will be on how prepack sales to directors are approached.  The judge in this case held that the director ‘cannot possibly have believed that a sale of the Property to him at that price without any proper marketing was in the interests of the creditors as a whole.’  Thus, whilst not preventing prepack sales to directors, the finding that there is an ongoing duty on the director to consider the interests of creditors will place an additional and separate duty on them to ensure the price achieved is at market value.  It also opens up the possibility that liquidators reviewing prepack sales could target director purchasers, particularly if it is discovered that the sale process was hampered by information and opportunities being concealed from the Administrator.  

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As published on 21 January 2020 on LinkedIn by Stephen Hunt   https://www.linkedin.com/posts/stevetheliquidator_judgment-system-building-services-group-ltd-activity-6625374254860955648-cJNn