Recent developments, including proposed changes to the UK companies and insolvency legal frameworks, present an increasing number of pitfalls for parties involved in the management of, and transactions with, distressed companies. This article considers recent cases concerning claims against stakeholders in insolvent companies and the third parties dealing with them, including most recently Lictor Anstalt vs. Mir Steel UK Ltd [2014] EWHC 3316 (Ch).

Stakeholders in distressed companies

In recent years we have seen an upsurge in claims brought on behalf of creditors against not only the formally appointed directors of a company, but also against others who have placed themselves in influential positions and who have in some way contributed to the company’s financial distress. This trend brings with it increased risks for non-directors who are closely involved in the decision-making of a company if the Court concludes them to be shadow directors. The impact of the proposed Small Business, Enterprise and Employment Bill (the ‘Bill’) may well be to increase such claims further. Whilst there has hitherto been a degree of uncertainty as to the scope of the duties that shadow directors owe to a company, the Bill proposes to amend section 170(5) of the Companies Act 2006 to provide that the general statutory duties of directors apply to shadow directors where, and to the extent they are capable of applying.

Jan-Mar 2015 issue

Herbert Smith Freehills LLP