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Director of insolvent company acted ‘responsibly’ in the conduct of its affairs

By: Ian Fitzharris BL

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High Court refuses company liquidator's application to restrict the respondent, as a former director of the company, from acting as a director of another company for a period of five years, on the grounds that he had acted 'responsibly' in his management of the company's affairs in circumstances where there was a concerted effort made on the part of his colleagues to create a 'phoenix strategy' to devalue the company and dissolve it, but the respondent acted responsibly in proactively seeking advice to fix underlying profitability issues in the business.

Liquidator's application to restrict respondents from acting as directors of a company - legislative requirements underpinning the application - no question relating to 'dishonesty' - sole issue of whether respondent acted 'responsibly' in conduct of company's affairs - company finances and growth strategy - company cashflow - history of the company - whether responsibility for insolvency of company and its net deficiency in assets at date of winding up rests with respondents - relations with company creditors - 'phoenix' liquidation calculated by colleagues within company - documentation unearthed by respondent in discovery - unauthorised blocking of a key payment to revenue - reasons for company's collapse - active attempts made to thwart respondent from saving company - story of intrigue - fundamental undervaluation of business - purpose of application is to protect public - hardship or stigma - burden of proof - objective standard - caselaw to be applied - likelihood of a danger to public if allow to practice unrestricted - acted responsibly in pro-actively seeking advices to fix underlying profitability issues in business - six issues identified by auditors - removal of key employees from payroll - respondent given very limited information or input into scheme against company - tax on bonuses paid to employees small and tax liability modest in overall context - inclusion of spouse on payroll - company car used by spouse at best an error of judgment - inappropriate use of personal expenses - directors' loans repaid in full - company free to engage consultants who played no party in company's eventual insolvency - application refused

Note: This is intended to be a fair and accurate report of a decision made public by a court of law. Any errors should be notified to the editor and will be dealt with accordingly.

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