Advocates Mathew Newman and Sam Dingle acted for the Joint Administrators of a Guernsey company (Company), which was a party to ongoing court proceedings in England.
The Joint Administrators applied to the Royal Court of Guernsey seeking an order that it issue a Letter of Request to the High Court of Justice of England and Wales, requesting the High Court to act in aid of and auxiliary to the Royal Court pursuant to section 426 of the Insolvency Act 1986 (1986 Act) in recognising the appointment of the Joint Administrators as administrators of the Company.
The law allows any person to be treated as a director even though that person has not been formally appointed as a director. Such directors are known as de-facto directors. By contrast, a de jure director is a person who has been validly appointed as a director.
The recent case of Re Snelling House Ltd (In Liquidation) [2012] EWHC 440 (Ch) serves as a useful reminder to consider possible claims against de-facto directors who may be acting under the wrong impression that they are beyond reprehension.
The facts
The law has for years tried to grapple with the Gordian Knot between protecting a debtor’s assets for realisation and distribution to his creditors and protecting third parties who enter into transactions with the debtor after the bankruptcy process has been initiated, completely unaware of that process.