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
Welcome to the second edition of ML Covered, our new monthly round-up of key events that are relevant for those dealing with Management Liability Policies covering D&O, EPL and PTL-type risks.
Latest insolvencies figures & quantifying "trading misfeasance" claims
The recent High Court decisions in Boughey & Anor v Toogood International Transport and Agricultural Services Ltd and Re Pindar Scarborough Ltd (in administration) have helpfully provided clarity on the extent to which secured creditors that have been paid in full are required to consent to proposed administration extensions. Unhelpfully, however, the court’s approach is fundamentally at odds with the position of the Insolvency Service.
One of the most stressful situations that a company director can face is their business becoming insolvent.
With the worry of fighting to keep the organisation from falling into administration or being wound up, it is easy to forget that directors’ duties remain applicable.
In fact, the risks and responsibilities increase when a company is in financial strife. This article explains everything you need to know about complying with directors’ duties when your company is insolvent.
The overriding duty
As 2023 ends and insolvency rates hit worrying new highs, any suggestion that there is light at the end of the UK’s economic tunnel is not supported by the statistics. We look at what may lie ahead for the restructuring and insolvency sector next year.
R (on the application of Palmer) (Appellant) v Northern Derbyshire Magistrates’ Court and another (Respondents) [2023] UKSC 38
On appeal from: [2021] EWHC 3013
On 13thFebruary 2024, the Insolvency Service (IS) released their latest monthly enforcement stats in relation to the directors’ disqualifications. The figures, whilst not surprising highlight some interesting points to note:
2023 marked the highest annual number of corporate insolvencies since 1993, according to figures released by The Insolvency Service this week. While creditors’ voluntary liquidations remained by far the most commonly used process, 2023 saw increases across all processes tracked by the Insolvency Service.
The latest quarterly figures from The Insolvency Service for Q4 of 2023, covering the period October to December, show that company insolvency volumes in England and Wales reached a 30-year high. 25,158 registered companies entered some form of insolvency in 2023. The food and drink sector has not been immune to this, and indeed has seen some of the biggest rises in insolvency as many businesses face significant financial challenges.
Multiple headwinds
Looking into the crystal ball at the start of the year to forecast future trends isn’t possible, but one common theme that we expect will continue to impact upon both directors and officers and insolvency practitioners (IP) is the increasing rise of corporate insolvencies.