Claims made by liquidators, READ THIS FIRST!
Sections of the Insolvency Act that could be used against you!!
- REDEMPTION OR PURCHASE OF OWN SHARES S76
- AVOIDANCE OF PROPERTY DISPOSITIONS S127
- AVOIDANCE OF ATTACHMENTS ETC S128
- UNCALLED CAPITAL. S150 / 165
- MISFEASANCE AND MISAPPLICATION ETC. OF PROPERTY S212
- FRAUDULENT TRADING S213
- WRONGFUL TRADING S214
- TRANSACTIONS AT AN UNDERVALUE S238
- PREFERENCES S239
- EXTORTIONATE CREDIT TRANSACTIONS. S244
Breach of fiduciary duties and misfeasance claims
If a director does not act in accordance with those statutory duties codified under the Companies Act 2006 he/she is in breach of their fiduciary duties. A breach of fiduciary duties can lead to a claim for compensation payable to the company / its liquidators for any losses arising as a result of the breach.
The main fiduciary duties include
- to act within the powers conferred by the company’s Memorandum and Articles of Association,
- to promote the success of the company,
- to exercise independent judgment,
- to exercise reasonable care, skill and diligence,
- to avoid conflicts of interest,
- not to accept benefits from third parties and to declare interest in proposed transaction or arrangement
- Antecedent transactions
There are a group of claims which a liquidator can bring which are referred to as “antecedent transaction” claims. These are essentially claims arising out of transactions entered into by the company before it went in to liquidation – and which the liquidator believes should be paid back personally by the directors. Examples include:
Preference claims
A preference claim is made where a creditor of the company is paid in preference to other creditors, or that creditor is put in a better position than other unsecured creditors (in the event of the company being placed into liquidation). A preference claim is made against the recipient of the preference payment, for recovery of the sum paid.
- There are a complex array of statutory and common law hurdles for such a claim to be successful, in the absence of which the preference claim will not succeed.
- Our team at FWJ are experts in defending these types of claim.
Transactions at an undervalue
Where an asset of the company is transferred or sold prior to insolvency then the liquidator can make a claim if it was sold for less than the market value of the asset. The loss to the company (and its creditors) as a result is recoverable in a similar way to a preference claim.
As with a preference claim there are many statutory requirements for a claimed transaction at an undervalue to be successful, including the very important issues of
- the time period when the goods were sold,
- the market value for the goods and
- various good faith requirements
Transaction defrauding creditors
This type of liquidator claim is often based on the claim for transactions undertaken to avoid future and potential creditors, and is not subject to any time limit. We successfully defend many directors on these types of claims.
Extortionate credit transactions
These can arise where the company is party to a credit transaction with unfair or unfavourable terms, such as the requirement to pay grossly inflated interest payments which would otherwise be unfair.
It will also apply if the company was in a vulnerable position at the time of the transaction. These claims can be hard for a liquidator or administrator to run and we can help defend them for you.
Avoidance of floating charges
A liquidator or administrator may declare a floating charge as invalid and seek to have it set aside. This can happen where the purpose of the charge was to secure old debt and it was granted within certain defined time-periods prior to the company’s insolvency and the company was insolvent at the time or became insolvent as a result of granting the (continues to the right)
BOUNCE BACK LOANS
(must check if fully entitled to the amount claimed and it was used as intended not as income etc)
CIBILS (must repay in full any BBL first)
COVID Grants
Furlough claims for employees (make sure that you have not claimed for more employees that you actually employed or you will be personal liable as Fraud)
If you have ticked any of the above then you could be liable for either repayment /legal action/disqualification as a director (up to 15 yrs)
ONE STOP SOLUTION
We can identify if any of the above are related to you
We tell you what the ramifications are to you (prior to instruction of an IP)
We give you all the possible outcomes you could be exposed to
We give you solutions to each breach we identify
We have a automated system that after you have submitted your accounts and bank statements (going back ? years)
We can produce a report that list any breach and provide you with a solution for each
REPORT
The report can be used to obtain the right IP for you as they will from the start not only have the full Creditors list of Debts but also any Directors liabilities outstanding and also an agreed repayment plan that is accepted before instruction so you will not have any of the nasty surprises at the end of the Liquidation.
The Report is backed by our affiliate IPs and includes Legal Help Cover ie directors disqualifications etc
