Bromley boy
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- 18 Jun 2015
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For anyone who is interested the following is a good overview of the situations in which directors may become personally liable (note these are civil actions that can brought by shareholders against directors. Wrongful trading is entirely separate to these and is a criminal offence):
https://uk.practicallaw.thomsonreut...ontextData=(sc.Default)&firstPage=true&bhcp=1
https://uk.practicallaw.thomsonreut...ontextData=(sc.Default)&firstPage=true&bhcp=1
Directors' liability is a very complex area of English law. Generally, shareholders can bring an action against the directors in certain circumstances, as follows:
Directors may also be liable to creditors in insolvency situations.
- Shareholders can, subject to obtaining court approval, bring a derivative claim on behalf of the company against the directors for negligence, default, breach of duty or breach of trust.
- Minority shareholders can bring an "unfair prejudice" claim seeking relief against the acts of the controlling directors of the company. Alternatively, the shareholders may, on grounds of oppression, seek the winding-up of the company on a just and equitable basis.
- Where the shareholder has a personal cause of action against the director (for example, as a result of a direct contract between the director and shareholder).
- Where, in exceptional circumstances, the director has breached the company's constitution and the action is incapable of ratification by the shareholders. In such cases, the shareholder can seek to enforce the relevant constitutional provision.
The liability of directors cannot be limited or excluded. Any provision that purports to exempt a director from liability for negligence, default, breach of duty or breach of trust in relation to the company is void (Companies Act 2006). In practice, when a claim is brought against a director for any wrongdoing, the director can either seek indemnification from the company or from the company's directors' and officers' (D&O) liability insurance policy.