The High Court in England recently issued a stark warning to directors who fail to consider their duties to the company and its creditors when entering financial difficulties.
Background
Categorisation of a charge as fixed or floating will have a significant impact on how assets are dealt with on insolvency and creditor outcomes.
Typical fixed charge assets include land, property, shares, plant and machinery, intellectual property such as copyrights, patents and trademarks and goodwill.
Typical floating charge assets include stock and inventory, trade debtors, cash and currency, movable plant and machinery (such as vehicles), and raw materials and other consumable items used by the business.
The Technology and Construction Court recently delivered helpful judicial guidance on when an insured’s cause of action under an the NHBC ‘Buildmark Choice’ policy, providing cover for contractor insolvency before practical completion arises.
On 19 August 2024, the High Court handed down its quantum decision in Wright v Chappell [2024] EWHC 2166 (Ch), which for the first time sets out the method for quantifying loss relating to "trading misfeasance" claims.
Introduction
Manolete Partners Plc, an insolvency litigation finance company, has successfully claimed against the former director of Just Recruit Group Ltd (Just Recruit) and awarded £918,590. The Insolvency and Companies Court of the High Court found that the director of Just Recruit, Norman Freed, had breached his directorial duties to the company during the business's financial collapse.
Background
Dispute Resolution analysis: In a judgment which brings to a conclusion the trial of the former BHS directors, the Court has held the directors joint and severally liable for the increase in net deficiency of the company arising out of breaches of duty which caused the company to continue trading.
Wright and others v Chappell and others; Re BHS Group Limited [2024] EWHC 2166 (Ch)
What are the practical implications of this case?
Introduction:
In an insolvency case involving both UK trustees and Russian Bank Creditors, the High Court issued guidance in regards to the potential breach of the 2019 Regulations surrounding sanctioned entities. The significant criminal and civil penalties potentially arising from this case make it a consequential and relevant case for UK arbitration and litigation lawyers to consider and understand. The final ruling deals with three key questions, as outlined in the court proceedings and expanded upon below.
Case Summary:
As ever, ‘back to school’ and the shift into Autumn provides an opportunity to reflect on the state of play in the UK economy. For the last few years – thanks in no small part to factors outside of their influence – September has been a time when clients have been seeking a lighthouse via which to avoid the rocks.
We examine the findings of the High Court’s decisions and discuss the lessons which directors of distressed businesses should take from them
The collapse of BHS in April 2016 remains one of the most extraordinary corporate failures in recent memory. Eight years on from the commencement of insolvency proceedings, and following a lengthy trial, the High Court has issued an expansive judgment on claims brought by the joint liquidators of four companies in the group against two former directors.
Factual background