Directors must pay after failing to keep company records
The importance of keeping accurate written records of directors’ dealings and activities was highlighted in a recent case before the Court of Appeal.
It involved five directors of a property company that had gone into liquidation.
The liquidator began proceedings to make the directors repay money owing on loan accounts and to pay compensation for misfeasance and breach of fiduciary duty.
Three of the directors denied any wrongdoing or that they owed any money, and two denied that they were directors at all.
At trial, the judge was concerned about the lack of company documentation and had to rely largely on oral evidence from the directors. He found this to be self-serving and unconvincing.
He found against the directors and said that had their version of events been true, it would have been supported by documentary evidence.
The Court of Appeal has now upheld that decision. It said that contemporaneous documentation was of the utmost importance when assessing evidence. It was significant when it was present, and it could also be conspicuous by its absence, as in this case.
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