Insolvency and misfeasance

Some other things not to do if insolvency is looming, or Misfeasance to give it a posh name.

To understand what misfeasance might be you have to consider the core duties of a director of a company.

A director is in a fiduciary position to their company.

These duties include:

  • a duty to act and use their powers in good faith, in the best interests of their company.
  • a duty to exercise their powers only for the purposes for which they were conferred.
  • a duty not to put themselves in a position where the interests of the company conflict with personal interests, or a duty owed to a third party.
  • a duty not to make a personal profit out of their position as director unless permitted by the company to do so.
  • a duty not to contract with others in such a way as to fetter their future discretion.

There are some others but they are not relevant when considering misfeasance. So, what is meant by misfeasance?

The bit of legislation that deals with it, Section 212 of Insolvency Act 1986, states that an action may be brought against someone who “is or has been an officer” of the company, in the event that the company in which they held office is wound up, allowing a liquidator, shareholder or creditor to bring an action if that office-holder has:

‘…misapplied or obtained, or become accountable for, any money or other property of the company or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company.’

Such claims may be in respect of overdrawn directors’ loan accounts, or even preferences and transactions at undervalue (described elsewhere)

If in doubt don’t!

Back to all news
Get in touch
Thank you for your getting in touch with us, a member of our team will be in touch shortly.
Something went wrong while submitting the form, please get in touch with us using the phone number above to deal with your enquiry.
Operating nationwide throughout the UK

At Frost Group, we want to make things as easy as possible for you. That is why, if you can’t come to us, we’ll come to you. We operate face to face, nationwide meetings, wherever is most convenient for you.

Croydon

Airport House
Purley Way
Croydon CR0 0XZ

bromley

Regus, One Elmfield Park
Bromley
BR1 1LU

London

86-90 Paul Street
London
EC2A 4NE

Leicestershire

Court House, Old Police Station South Street, Ashby de la Zouch
LE65 1BR

Proud members of

Authorised by

Frost Group Limited is authorised by the Financial Conduct Authority. Authorisation number 669247.