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Contentious Insolvency

Inevitably when formal insolvency intervenes, the respective rights of all stakeholders involved in or dealing with the insolvent crystallise and give rise to a wide range of disputes.

We have an enviable reputation and expertise in handling all aspects of insolvency investigation and litigation, acting primarily for insolvency practitioners, but also lending institutions, directors and corporate clients, in dealing with:

  • Avoidance of improper transactions
  • Recovery of misapplied assets
  • Wrongful/fraudulent trading
  • "Phoenix" companies
  • Defending director disqualification proceedings
  • Commercial and insurance disputes

Fraudulent Trading

Following the winding up of a company, if a liquidator comes to the decision that the business of the company has been carried on with the intent to defraud creditors, then he can apply to court for a declaration that anyone who was party to the fraudulent business must make a contribution to the company's assets.  This is otherwise known as fraudulent trading.

Section 213 of the Insolvency Act 1986 only applies to those who were knowingly party to the fraudulent trading.  Where there is more than one party who is liable then the court will apportion liability between the respondents by looking at how much control each party had over the company's affairs and what benefit each party gained.

A director who is held liable under Section 213 of the Insolvency Act 1986 may also have a disqualification order made against them by the court.

Wrongful Trading

A potential problem for directors or shadow directors of a company in financial difficulties is wrongful trading.

A liquidator can make an application to court for an order that a director who was or is a director of the company which has gone in to insolvent liquidation knew or ought to have known that there was no reasonable prospect that the company could avoid such insolvent liquidation. A company goes in to insolvent liquidation when its assets are insufficient to pay its debts and other liabilities.

The court will not make such an order if the director or shadow director can show that they took every step available to them to minimise the potential loss to the company's creditors. Dishonesty is not necessary and therefore the burden of proof is lower than that for fraudulent trading.

We advise directors on how to avoid an action being brought against them for wrongful trading in the future, before the company enters in to insolvent liquidation. For example, by ensuring that directors hold regular board meetings and clearly minute all financial decisions that they make.

Seeking specialist legal advice early on in the insolvency process is crucial to any director who is concerned about his/her potential liabilities as a director of a company in financial difficulties.

Recent work

Examples of our recent work include:

  • acting for administrators in a successful multi million pound insurance claim
  • acting for administrators in successfully challenging the payment of £150,000 as transaction at an undervalue
  • successfully defending directors in disqualification proceedings
  • acting for liquidators of a large plumbing contractors business on a £1m plus fraud investigation
  • acting for liquidators of an ATE insurer in a dispute over £6m of insurance proceeds
  • acting for administrators of an online resource provider. The appointment was complicated by a dispute amongst the directors, one of whom was a substantial debenture holder, necessitating a court application for permission to sell fixed charge assets before completing a sale of the business.

Contact us today

Find out more about our business recovery services today by calling one of our Yorkshire offices. We have offices in Sheffield, York and Leeds. Our team can also be contacted via the contact details below.

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