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Our client, the sole director and shareholder of his company, faced claims from the company’s liquidators alleging misfeasance and breach of fiduciary duty under section 212 of the Insolvency Act 1986. The liquidators sought £83,864.98 in relation to payments made to our client and his wife while the company was allegedly insolvent. Through careful evidence review, negotiation, and strategic settlement discussions, we successfully reduced the claim to £30,000, reflecting our client’s financial circumstances and mitigating his potential liability.
Our client was the sole director and shareholder from at least 2010.
The company entered into a Company Voluntary Arrangement (CVA) in March 2018 and was placed into compulsory liquidation on 3 April 2019, following a winding-up petition in February 2019.
A review of the company’s financial records by the Liquidators revealed payments totalling £83,864.98 to our client and his wife while the company was in financial distress.
Liquidators asserted the company was in financial difficulty from at least 1 May 2017, potentially insolvent from that date.
They intended to bring claims for breach of fiduciary duty/misfeasance under section 212 IA 1986.
The client needed to provide comprehensive evidence of payments, requiring a time-intensive process.
Conducted a detailed review of the company’s bank statements, dividend records, and correspondence.
Assisted the client in gathering and organising evidence to demonstrate the legitimacy and timing of payments.
Analysed the company’s financial position to argue mitigating factors regarding the director’s knowledge of insolvency.
Advised our client on potential defences including that he had acted in good faith, without intention to defraud creditors and/or that payments were structured as legitimate dividends.
We then commenced settlement negotiations emphasising our client’s limited financial resources and reliance on pension funds, without admitting liability we negotiated a reduction in the claim from £83,864.98 to £30,000.
The claim of £83,864.98 was successfully reduced to a settlement of £30,000.
The client avoided a protracted and expensive litigation process.
Thorough Documentation Matters: Comprehensive collection and review of evidence are critical in defending director claims.
Early Negotiation Reduces Risk: Engaging in early settlement discussions can significantly reduce potential liabilities.
Mitigation Strategies: Demonstrating mitigating circumstances, such as limited income and non-intentional breach, can materially affect outcomes.
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