Court rules directors' duties survive insolvency

Jan Samuel

In an important case decided earlier this year, the High Court was asked to consider whether the duties a director owed to his company, continued after the company went bust. 

The sole director of a company purchased a two bed house in Essex, at a significant undervalue. He bought the property from the company, 18 months after it had been placed into administration.

The High Court regarded the purchase as unfair and held that the director was in breach of his fiduciary duty to act in the interests of the company's creditors as a whole.

The director was found liable to pay the liquidators the money he had saved by not placing the house on the open market.

The ruling shows that directors cannot buy back business assets on the cheap post-administration as they must continue to comply with their duties as a director of the insolvent company.

If you are dealing with an insolvency situation, as the director of a company which has gone into administration, as the creditor of a company which owes you money and has gone bust, or in any other context, you may well need legal advice about what you can and can't do. 

Our insolvency lawyers are here to help. Contact us today for a free initial discussion. 

Case reference: Systems Building Services Group Limited [2020] EWHC 54 (Ch)