There are certain rules and regulations surrounding company liquidation, many of which focus on your actions as a director. Once a company becomes insolvent, you must put creditor interests first by ceasing to trade and safeguarding its assets, with little or no consideration for shareholders, members or directors.

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Gowling WLG's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.

Having launched the original version three years ago, we have refreshed our Safeguarding Your Business guide as an eBook. The guide assists clients in protecting themselves either proactively or reactively in respect of a counterparty’s insolvency with new sections on trusts and examples of how we have helped, using some of the principles raised.

The case of Burnden Holdings (UK) Limited (in liquidation) v (1) Gary John Fielding (2) Sally Anne Fielding [2016] determined whether a claim in respect of breach of duty against two directors of Burnden Holdings (UK) Limited (Burnden) was time-barred. The alleged breach of duty was in connection with a distribution in specie. The Court of Appeal overturned the High Court’s decision and held that section 21 of the Limitation Act 1980 (LA 1980) applied so that the claim was not subject to the usual period of limitation.

Under the insolvency legislation, any dispositions of property or payments made by a company after it has been presented with a winding up petition are void, unless validated by the Court.

In Evans v Jones the directors of a liquidated company sought to defend a claim brought by the liquidators that loan repayments were insolvent transactions by asserting that the company was balance-sheet solvent at the time of the transactions.  The directors based this claim on the company having contingent assets in the form of dividend payments (to the directors) that were later found to be unlawful. 

The UK Supreme Court has confirmed that an irrevocable agency will only be created in exceptional circumstances.

I can show that a company is insolvent and that it is reasonably likely that the statutory purpose can be achieved. I can have an administration order, right? Eh, actually no.

Creditors issued applications for administration orders against two hotel-owning companies. The companies sold hotel rooms as leases, which provided for repurchase in certain circumstances.

Campbell v Peter Gordon Joiners Ltd (in liquidation) and another (2016) UKSC 38 considered whether an employee could successfully bring a civil action against a director of a company in liquidation for having failed to obtain appropriate employers' liability insurance.

C was an apprentice joiner employed by a company who suffered an injury at work whilst working with an electric saw. The company held employers’ liability insurance but it did not respond to C's claim as the policy excluded claims arising from the use of “woodworking machinery” powered by electricity.