Interests of the creditors intrude where the company is of doubtful solvency or insolvent

HLC Environmental Projects Ltd (the company) was involved in two waste management and recycling projects based in Wales. Neither project was ultimately a success.

The case concerned payments made by the company (now in liquidation) at the direction of the respondent director. Of the four categories of payments, three were made to the director or companies connected to him or the company. The final category was made to an unconnected bank. By way of example, at a point when the company’s financial position was ‘perilous’ according the judge, the company sold its interest in one contract for £1.2m. Those proceeds were shared between a connected company and the director personally.

The judge held that the company was insolvent on both the balance sheet and cashflow bases from November 2005 to October 2008 (the period in which all the payments complained of were made)…

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