Shadow director (Insolvency) meaning

Re Grosvenor Property Developers Ltd (in liquidation) Atkinson and another v Varma (also known as Sanjeev Varma) and others [2020] EWHC 1114 (Ch) What are the practical implications of this case? There are four practical consequences flowing from this ruling: It firmly affirms that a defendant who has been debarred may not at all advance submissions in their own defence, save to point out obvious, manifest errors. It also delineates how far, in practice, the claimant must go to properly establish the claim against such a party. It offers an instance of a highly persuasive forensic case, without any expert opinion or cross-examination, that both documents and individuals were inventions. It considers the line between de facto directors and shadow directors. It exemplifies an award of compound interest in a dispute concerning the misapplication of corporate funds. What was the background? The company raised approximately £7.5m from investors to transform a derelict hotel into student housing. By the...

When mini-bond investments fail—fraudulent trading and other claims (London Capital & Finance v Thomson) London Capital & Finance plc (in administration) and others v Thomson and others [2024] EWHC 2894 (Ch) What are the practical implications of this case? The clearest takeaway is that probity is paramount. In short, the defendants were undone by deceit and avarice. To expand, the court accepted a contention from the Claimants that LCF functioned, in effect, as a Ponzi scheme—defined as an arrangement whereby interest and other amounts owed to earlier investors are discharged using proceeds from later investment. The apparent purpose was to advantage four specific individuals by raising funds to be used for their benefit, or for companies in which they had an interest. The claims against two of those people, who were directors of recipient companies, were resolved. The remaining two were, respectively, a director of LCF at all relevant times and a shadow director of LCF. The scheme was heavily promoted by one of the two defendant companies,...

Offence of re-using company name without permission The Insolvency Act 1986 (IA 1986) curtails the re-use of a company’s name for five years where, in the year leading up to insolvency, any director or shadow director of the insolvent company becomes involved with the successor entity (see Who is caught by the restriction?). A director must not participate in a business that adopts the identical legal or trading name, or a name so alike as to imply a link with the earlier company, unless an exception applies (see Scope of restriction). Importantly, this curb is imposed on the individual rather than the company itself, as there are numerous innocent or practical reasons why different companies may carry the same or a comparable name. Under IA 1986, s 216, breaching this curb constitutes a criminal offence, and section 217 is aimed at removing the financial attraction of exploiting insolvency by allowing creditors to seek to pierce the corporate veil and by rendering any director (or any accomplice) who contravenes section...

Use of terms ‘connected’ and ‘associate’ in pensions Although initially coined within the insolvency/bankruptcy regime set out in the Insolvency Act 1986 and underlying regulations, the notions of ‘association’ and ‘connection’—together with the allied idea of ‘control’—have, over time, been adopted and applied across various parts of the UK’s pensions legislation framework for practical purposes in appropriate cases. Examples include: Moral hazard powers — the terms are employed in the moral hazard provisions of the Pensions Act 2004, in practice to assess the degree of distance or proximity of entities from sponsoring employers of occupational pension schemes, and whether such entities might be susceptible to the Pensions Regulator’s moral hazard powers, for example the issue of financial support directions and contribution notices — for further information, see Practice Notes: Contribution notices and Financial support directions Employer-related investments — the terms are used in the employer-related investment framework in relation to the capacity of trustees of occupational pension schemes to enter into dealings with the schemes’...

This note aims to: offer clear, practical guidance to shareholders of a distressed or insolvent company set out the position of shareholders across most types of corporate insolvency or restructuring scenarios suggest steps a shareholder can take to maximise their position if the company becomes distressed This note is specifically designed to help shareholders secure the strongest possible footing as the company enters the ‘zone of insolvency’. During ordinary trading, the interests of creditors and shareholders typically run in parallel. Yet, once the business moves into that ‘zone of insolvency’, then directors’ duties realign and are owed to creditors instead (see Practice Note: Directors’ duties: companies in financial difficulties). The point at which that shift occurs will be determined on the specific facts in each individual instance (see News Analysis: Directors' duties and assessing insolvency)...