If you are the director of a private limited company you will usually bear no personal risk if the business you work for fails, becomes insolvent or goes into liquidation. That is unless you are accused of having done something wrong or having failed to comply with your legal duties. Where concerns about your actions are raised, the risk of personal liability can arise and with it the possibility that you could be ordered to contribute towards the company’s debts. In the most serious cases you could be barred from taking up future directorships or sentenced to a period of imprisonment

Meta Panchamia
Meta Panchamia
Partner & Deputy Head of Civil & Commercial Litigation

This was the prospect facing a client who was accused of transferring company property into their name, shortly before the company collapsed, with the intention of improving their personal position at the expense of company creditors.

Investigating the charges fell to Meta Panchamia in our commercial litigation team.  As Meta explains

This was an unusual case as the director had only been in post for two months when the company collapsed.  However, during this time they had arranged for a company property to be transferred into their name, which obviously caught the attention of the liquidator.  It was our client’s case that the transfer occurred to recompense them for personal monies they had advanced to the company to help reduce debt levels.

The transaction was handled by the company’s accountant and records documenting the transfer of funds were in existence.  Frustratingly though, the accountant refused to release the records until monies owed to them had been settled. This meant that we had to trawl through our client’s bank accounts to try to trace the payments made, some of which had been electronically transferred and some of which had been made in cash.

Eventually we managed to compile evidence to substantiate a portion of the payments, but it was clear that what had been paid fell significantly short of what the property was worth and that our client was going to have to pay something to reflect this.

For personal reasons the client wanted to keep hold of the property so we began negotiations with the liquidator to see if a deal could be done.  Our client could not afford what was initially demanded but with the support of a creditor related to the client, who agreed to waive their claim as part of a settlement package, we were ultimately able to put an acceptable proposal together that shaved £150,000 off what the liquidator had originally wanted.

This was a fantastic result for our client who got to keep the property at a fraction of the cost they might otherwise have had to pay and without the risk of any further action being taken.  It is also testament to Meta’s expertise and her ability to negotiate deals she knows are likely to be attractive to liquidators given that, as well as advising directors in insolvency proceedings, she also regularly advises liquidators on their position as well.  

We Can Help

If you are a director facing a personal liability claim, why not give Meta a call on 020 3551 8500 or use our Contact Us form to to see how she can help. You will not be charged for your call and we offer a range of funding options to help you budget for any assistance you require.

Meta can also advise on director and shareholder disputes outside of insolvency proceedings and on any other commercial disputes that may arise. 

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