Defending Claims by Liquidators or Administrators

Following the demise of a company into an insolvency process, the liquidator or administrator (known as the ‘officeholder’) will look very closely at transactions between the company and directors or associates of the director. The officeholder will also examine the actions of the director prior to the insolvency process.

JMW has extensive experience advising directors on such claims, and defending litigation brought by officeholders against directors and third parties. We can assist directors at any stage of the process, including the pre-insolvency process, if the director is concerned there may be issues.

To speak to a solicitor about defending claims by liquidators or administrators, contact us by calling 0345 872 6666, or by filling in our online enquiry form and requesting a call back.

How JMW Can Help

A director of a company facing insolvency should seek immediate advice from insolvency specialists as to whether to continue trading or put the company into administration or liquidation. The director is under a duty to act in the best interests of the company’s creditors and their conduct in the period leading up to insolvency will be scrutinised.

We regularly advise directors on their duties and options when defending claims by liquidators or administrators. We work with forensic accountants and other specialists so we can tailor the level of service and cost to the client’s needs.

Our team also includes an experienced licensed insolvency practitioner so you can rest assured that your case is in the right hands. We are experts in confiscation and restraint proceedings and have a track record of challenging court orders.

Types of Liquidator and Administrator Claims

Investigations carried out by liquidators and administrators may give rise to claims against a director or third parties. The officeholder can bring the following claims against directors, former directors or third-party beneficiaries:

Misfeasance (s212 IA 1986)

Directors who have misapplied, retained or become accountable for any money or other property of the company, or have been found guilty of misfeasance or breach of duties in relation to the company, can be compelled to repay, restore or account for the money or property with interest, or contribute to the company’s assets by way of compensation.

Fraudulent Trading (s213 and s246ZA IA 1986)

Any director who is knowingly party to the carrying on of any business of the company with the intent to defraud creditors of the company or those of any other person, will be personally liable to contribute to the company’s assets, in the event of liquidation or administration.

Wrongful Trading (s214 and s246ZB IA 1986)

A director will be liable to make a contribution to the company’s assets where, in the course of an administration or winding up of a company, it appears that they knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into administration or insolvent liquidation. This includes a failure to take every reasonable step to minimise the potential loss to the company’s creditors.

Transactions at an Undervalue (s238 IA 1986)

This occurs when a company makes a gift to, or enters into a transaction with, a person on terms that provide the company with no consideration or consideration to a value that is significantly less than the value of the consideration provided by the company.

Preferences (s239 IA 1986)

This is when a company gives preference to one of the company’s creditors, a surety or a guarantor by doing or allowing something that has the effect of putting that person in a better position than they would have otherwise been in the event of liquidation or administration, had that thing not been done.

If an officeholder is able to establish that a director was influenced by a desire to prefer, they will seek to have the transaction set aside.