Judge rules on which director liabilities still stand after liquidation

• In Systems Building Services Group Limited [2020] EWHC 54 (Ch), the court ruled that the director was liable to pay the liquidators of his company money he saved by not placing a house owned by the company on the open market when the company went under.
• Insolvency and Companies Court Judge Barber ruled that Brian Michie unfairly bought a two-bedroom house In Billericay, Essex, from an insolvency practitioner 18 months after the company of which he was a sole director was placed in administration.
• Where the company is insolvent or likely to become insolvent, the duty of Mr Michie, as a director, to act in the best interest of the company is regarded as a duty to act in the interests of its creditors as a whole.
• Mr Michie did not do this. The company was insolvent at the time of the purchase, and the house in question was significantly undervalued in order for Mr Michie to receive a cheaper asset.
• In judgment Barber J ruled that ‘the duties owed by a director to the company and its creditors survive the company’s entry into administration and voluntary liquidation’.
• This case has been one of the first of its kind to identify which director duties survive even after the company has been liquidated.

See the full case here.

Aspire Comment

As the director of an insolvent company, you have certain legal responsibilities to any outstanding creditors of the business, as established in the case above. Once a company becomes insolvent, you must put creditor interests first by ceasing to trade and safeguarding its assets.

The law around director duties after insolvency can be complex, so it is imperative that you seek professional advice if you have any concerns. Call Aspire on 0121 445 6178 or email enquire@aspirepartnership.co.uk to speak to an adviser.