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Breach of Directors’ Duty Claims
Company directors are responsible for representing and promoting the interests of the company. This includes being responsible for the company’s filing and reporting requirements and complying with duties set out in the Companies Act 2006.
If a company director breaches their duties, they could face civil action and, in some cases, criminal proceedings. It is imperative that you seek advice and representation from the expert solicitors at JMW at the earliest possible stage to protect yourself and the company throughout any legal proceedings.
JMW’s team of director services solicitors are well versed in defending cases brought against directors for breach of duty.
How JMW Can Help
Our expert solicitors have experience handling all aspects of director-related company law and can help avoid risks and provide clarity for directors on their duties and options. The team’s skills include seeking or defending injunctions, tracing assets and resolving disputes.
We have handled many complex situations where company directors need legal guidance to ensure they stay on the right side of the law. Our team includes an experienced licensed insolvency practitioner and we work with forensic accountants and other services both large and boutique so we can tailor the level of service and cost to the client’s needs.
The Duties of a Company Director
Directors owe various duties to the company, which are set out in the Companies Act 2006 and are as follows:
1. To act within powers (s171)
2. To promote the success of the company (s172)
3. To exercise independent judgment (s173)
4. To exercise reasonable care, skill and diligence (s174)
5. To avoid conflicts of interest (s175)
6. Not to accept benefits from third parties (s176)
7. To declare an interest in a proposed, or existing, transaction or arrangement with the company (s177 and 182)
Under the Companies Act 2006, directors are also legally responsible for the company’s
filing and reporting requirements, failure of which is often a criminal offence. Directors are required to keep adequate accounting records and can be found criminally liable if they fail to comply (s386 and 387). Directors must not approve accounts unless they are satisfied that they give a true and fair view of the company’s financial position (s393). Where a directors’ report containing the statement required by s418 is approved but the statement is false, the director(s) will be guilty of an offence and may be liable to compensate the company for any loss suffered by the company as a result (s463).
It is the responsibility of the directors to send the company’s annual accounts and reports (s441) and confirmation statement (s853A) to Companies House. Whilst it is the company who is required to maintain its register of members (s113) and register of people with significant control (s790M) any failure to do so may result in the directors of the company being criminally liable. Repeated breaches by a director may result in disqualification proceedings.
What Happens if a Company is Insolvent
In the event that the company becomes insolvent, a director found to have breached their
duties may become personally liable. A breach of certain duties can result in criminal proceedings being brought against the director.
If an officeholder discovers a breach of duty by a director, including former directors, they
can bring a claim against the director in breach. The claim will be viewed as an asset of the
company and may be pursued for the benefit of the creditors.
The company cannot ratify any breach of duty involving an unlawful act, dishonesty or fraud.
Further, a director cannot be exempt from liability for any negligence, default, breach of
duty or breach of trust by them in relation to the company (s232(1)).
If former directors of insolvent companies are found to have breached their duties, an officeholder may bring a claim against the directors for misfeasance.
Claims brought against directors for fraudulent breach of duty or trust will not be subject to a limitation period. Accordingly, officeholders and creditors of the company are able to issue claims against directors outside of the limitation period in relation to fraud. It is irrelevant if the breach involved the misappropriation of company assets; the director will still