Civil Litigation Videos

Date when Video was Published: 17/03/2025

The position of a company director comes with a number of responsibilities including legal duties … which if breached, can bring significant personal risk. If as a director you allow your company to trade whilst the business is unable to pay its debts, if liquidator is appointed after the company is wound up, you could face a personal claim to compensate creditors. Today, we discuss an important High Court case involving the collapse of BHS, where directors were hit with a judgment of over £110 million. In the case of BHS, liquidators took legal action against former directors for breaching their duties. One director, despite not acting dishonestly, was found to be ‘out of his depth’—a stark warning that lack of expertise is no defence. The Court ruled that leniency would encourage reckless decisions by other directors in the future. So, what does this mean for directors? The Companies Act 2006 outlines key responsibilities you MUST always follow: • Act in good faith – Prioritise the company’s success and, in some cases, creditors over shareholders. • Use your powers properly – No conflicts of interest. • Exercise independent judgment – Take professional advice. Demonstrate care, skill, and diligence – The higher your expertise, the higher the expectations. The biggest trap directors fall into? To allow an Insolvent Company to trade, allowing debts to build up. If a company is struggling, directors must shift their focus to protecting creditors' interests from shareholders. It is no defence to say they did not know. Courts will assess: • Did you know insolvency was likely? • Did you seek advice and act accordingly? • What steps did you take to mitigate creditor losses? Failing to act responsibly could lead to personal liability for company debts. Protect Yourself If you’re a director facing such a situation, you should seek urgent advice, NOW. Seek legal advice as early as possible before financial trouble hits. At Duncan Lewis, our Corporate Litigation Team specialises in protecting directors from personal liability. Contact us today for expert guidance.

Disclaimer

This video content was created on 17/03/2025 to provide an overview of the legal position and the information was correct at the time this video was created. This video has been produced for purposes of generic information and marketing purposes only. While the information on this site is about legal issues, it is not intended as legal advice or as a substitute for the particularised advice of your own legal advisor. Please consult one of our lawyers to provide you with advice and assistance on any matters touched on this video. Viewing of this video does not create legally binding advice and does not create a retainer with Duncan Lewis Solicitors. This video is Copyrighted at Duncan Lewis Solicitors 2025. Any illegal reproduction of this content is prohibited and will result in immediate legal action.