Introduction

This Note deals with the potential liabilities under English Law of the directors and officers (secretary and managers) of a UK company in the event of its (potential) insolvency.  

Summary  

Directors - and, to a lesser extent, other officers of a company - face a number of areas of potential personal liability. Of most relevance is the liability of the directors for ‘wrongful trading’.  

The following is a broad overview of the duties and liabilities of directors when their company is in financial difficulties. It is a general guide only and there will be variations according to the specific laws in each jurisdiction.  

The lengthening of the restoration period for dormant companies may make a solvent liquidation an attractive option for some companies. James Stonebridge examines the impact of changes introduced under the Companies Act 2006.

The House of Lords has had some important things to say about receivers’ liability in tort, and the law of conversion.

In the recent case of OBG Ltd v Allan, the House of Lords has ruled on key aspects of economic torts and the law of conversion (that is to say, the wrongful dealing with property in a way that is inconsistent with the owner’s rights). The law lords decided that the receivers should not be held liable for the damage which a company may have suffered as a result of the loss or underrealisation of business contracts.

On March 27, 2020, President Donald Trump signed into law the third major coronavirus-related legislation in the last several weeks – the Coronavirus Aid, Relief, and Economic Security (CARES) Act – in response to the pandemic and resulting economic crisis. The CARES Act includes substantial federal spending and loan commitments that will benefit individuals and businesses.

 Australian satellite-based IoT startup Sky and Space Global Ltd. filed for Voluntary Administration in Australia, the equivalent of a Chapter 11 bankruptcy in the United States. April 13 – OneWeb Global Ltd. (OneWeb), which filed for Chapter 11 bankruptcy protection in the United States last month, announced that it secured a commitment from its largest secured creditor, SoftBank Group Corp., to provide up to $75m in debtor-in-possession (DIP) financing to fund its ongoing operations during the bankruptcy proceeding. The DIP financing proposal was approved 

Enacted March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) places short-term obligations and restrictions on lenders and servicers of federally backed loans. As part of these limitations due to Coronavirus Disease 2019 (COVID-19), lenders and servicers are temporarily subject to moratoriums on foreclosures, mandatory forbearance obligations, and revised credit reporting obligations.

Operating a consumer finance company in normal times is no simple process—in the on-going pandemic, it is even tougher.  

This may be a good time to step back a minute to examine the most common mistakes that we see made by finance companies.  I offer the following for your consideration:  

In 2017, in Bristol-Myers Squibb Co. v. Superior Court,1 the Supreme Court of the United States held that, in federal cases involving multiple plaintiffs, each plaintiff must establish that the court has personal jurisdiction over each of its claims.2 This severely limited the forums where plaintiffs could bring multiple-plaintiff cases against defendants.

In this type of market environment, one or more of the following scenarios may apply: