Directors take care: new guidelines to help interpret two of the Companies Act statutory duties of directors

By Susan Way

We now have recent guidelines to help interpret two of the Companies Act statutory duties of directors: the s172 duty to promote the success of the company and the s171 duty to exercise powers for the purposes for which they were conferred.

In Hellard & Ors v Carvalho, the claimants were the liquidators of an insolvent company previously run by Mr Carvalho (C), its principal director. They brought proceedings under the ‘misfeasance’ procedure of the Insolvency Act 1986 for breach of duties and sought financial relief against C.

The judge found that C chose which creditors to pay and which to leave exposed to the real risk (as it turned out) of being left high and dry. It probably didn’t help C’s case that the payments included repayment of debts owed to his father, payments made to himself and to companies personally controlled by him and Christmas bonuses made to a key employee…

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