LEXLAW Solicitors & Barristers
In a significant July 2026 ruling, the Supreme Court has confirmed that a director’s duty to act in good faith under section 172 of the Companies Act contains an objective element. A director who covertly pursues his own preferred outcome while misleading the board breaches his fiduciary duty, even where his motives are sincere.
When a company enters liquidation, the liquidator investigates the conduct of its directors and can pursue personal claims for misfeasance, wrongful or fraudulent trading, preferences, transactions at an undervalue and transactions defrauding creditors. This succinct guide explains each claim and, crucially, how a director can defend it.
The High Court held that Paul and Joanne Rutter unlawfully reduced their directors’ loan account by £560,000 through a back-dated dividend and misapplied over £256,000 of company funds on their personal properties while Rut5 Ltd was approaching insolvency, breaching duties under the Companies Act 2006 and the Insolvency Act 1986.
The High Court, per Chief ICC Judge Briggs, held that Manolete Partners could not advance misfeasance claims under section 212 Insolvency Act 1986 via an Insolvency Application, and instead had to pursue them under CPR Part 7, ordering payment of the full Part 7 issue fee despite procedural arguments about hybrid claims brought in insolvency proceedings.
If you’re facing liquidator legal action backed by Manolete Partners (or other litigation funders), expert legal representation is essential. We specialise in defending clients against such claims. Our expert team provides strategic legal support to counter aggressive tactics and ensure the most optimal outcome is achieved by you in your case.