Directors' Disputes
The Companies Act 2006 governs the general duties of a director of a UK limited company. Directors have authority to bind the company to contractual arrangements and obligations, and to incur liabilities on its behalf.
This authority has certain caveats which must be considered by prospective directors as well as shareholders. Directors are usually employees of a company, notwithstanding that they will have more power and responsibility than their colleagues. It is therefore vital that their rights, duties and authority are properly documented within their employment or service contracts.
At Mercantile Barristers, our directors’ duties barristers have expertise in providing advice and representation to shareholders and directors in understanding their legal obligations to one another. If you require advice contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Director Agreements
Within a director’s service contract, it is important to include clauses that require a director to act within their powers; promote the success of the company; exercise independent judgement; exercise reasonable care, skill and diligence; avoid conflicts of interest; avoid accepting benefits from third parties; and to declare all personal interests in proposed transactions. In addition to these general duties, a company may want to impose other duties on the director and these should also be included in the service agreement together with the consequences of failure to comply.
It is not uncommon that directors may also hold shares in the company. As such, shareholders’ agreements and employment or service contracts ought never to contradict each other but should always work together to stipulate the consequences for breach of either contract. For example, a majority shareholder may not want a director that has been dismissed for gross misconduct continuing to hold shares in the company. Our barristers are available to advise on such provisions.
At Mercantile Barristers, our barristers have expertise in providing advice and representation to shareholders and directors in drafting and interpreting director agreements. Our barristers are adept at understanding the particular standards required of decision makers and leaders in your business; advising on the most appropriate form of agreements to curb or expand a director’s authority; and drafting appropriate employment or service contracts to protect the business. If you require advice contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Director Disputes
Disputes in the boardroom are common. In 2013, CEDR and the IFC Corporate Governance Group conducted a global survey of almost 200 directors and board members, revealing that circa 30% of respondents had experienced a boardroom dispute which affected the survival of the business and circa 43 %reported that conflict had reduced the level of trust between board members.
Without sound legal advice as to which is the best course of action, a director may be made personally liable for the company’s losses. The Company Directors Disqualification Act 1986 also gives powers to liquidators to disqualify directors for up to 15 years.
Our director disputes barristers have experience in advising and representing shareholders and directors in starting, or defending the following claims:
Director Breach of Duty
Pursuant to sections 171-177 of the Companies Act 2006, claims may be made against directors if they breach their fiduciary duties to shareholders pursuant to contract and generally under common law to act legally, honestly and in good faith and statutory duties.
If you require legal advice on director breach of duty claims contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Guarantee Claims
Directors will often give personal guarantees when the company applies for a loan. These guarantees also extend to lessors of hiring equipment and landlords of the company’s business premises. The guarantees can also be supported by security over the directors’ homes. Upon liquidation or administration, lenders are quick to call in guarantees, putting directors at risk of losing their home.
If you require legal advice on director guarantee claims contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Preference Payments
A Preference Payment is a payment by a company to a creditor placing it in a preferred position to other creditors. Upon liquidation of the company, the liquidator can bring a claim against the alleged favoured creditor for a refund of any monies received. The company must have been insolvent at the time of the transaction or become insolvent as a result; and the company must have desired to prefer the creditor.
If you require legal advice on director preference payment claims contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Repayment of the loan account
During an insolvency practitioner’s examination, the director may be subject to what are commonly referred to as clawback claims. In owner managed businesses the directors will usually have a low salary, but withdraw cash at their convenience. These may be accounted for as drawings/salary expenses or dividends upon the company’s financial year end, or the director’s loan account. Directors may be subject to claims to repay these loans or dividends, if the company had insufficient profits at the time.
If you require legal advice on repayment of a director loan account contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Transactions at an Undervalue
Transactions at an undervalue (“TUV”), occur when a company transfers an asset to another for consideration less than the market value of that asset, or no consideration at all. The transaction must have taken place within the two-year period before the onset of the insolvency; and the company must have been insolvent at the time of the transaction or become insolvent because of it.
If you require legal advice on transactions at an undervalue claims contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Transactions Defrauding Creditors
Transactions that defraud creditors are transactions by the insolvent company that are intended to place assets out of reach of the creditors. Sections 213 and 246ZA of the Insolvency Act 1986 aim to prevent companies from disposing of assets to the detriment of its creditors. If successful, the transaction will be void and the assets returned to the company. The Court must be satisfied that the transaction was intended to affect the creditors detrimentally and there is no time limit attached to the transactions.
If you require legal advice on transactions defrauding creditors claims contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Wrongful Trading
Wrongful trading is an offence that can be committed by directors if they continue to trade a company knowing that the company could not avoid insolvency. The offences in sections 214 and 246ZA of the Insolvency Act 1986 cover actual and objective tests of knowledge and if wrongful trading is successfully established, directors may be personally liable for any of the company’s losses as a result.
If you require legal advice on director wrongful trading claims contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
Mercantile Barristers have expertise in providing advice and representation in director disputes claims to clients, whether they are businesses or individuals; or director disputes solicitors. We have particular experience in advising clients on the extent of directors duties; director agreements and an array of director disputes. We also have experience in taking instructions from director disputes solicitors representing their clients in proceedings concerning director disputes before the county court; Insolvency and Companies List in the King’s Bench Division; Court of Appeal and Supreme Court. If you require advice contact our Commercial Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
How Our Process Works
You can call, email, or fill out an enquiry form to tell us about your case. One of our specialist clerks will speak with you to make the arrangements to advance your case.
Our specialist clerk will match you with the barrister with the expertise to deal with all aspects of your case. They will also obtain and organise the papers the barrister will have to consider in your case.
Our clerk will agree the fee for your consultation with the barrister beforehand. The clerk will then arrange a convenient time for you to have the consultation by video call, telephone or in person.
In the consultation the barrister will assess your legal position, devise a legal strategy, and give you appropriate advice on the necessary next steps to achieve your objective.
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