Directors must repay money taken from insolvent company
Two directors have been ordered to repay £758,020 after they acted unlawfully in removing funds from their business to avoid paying creditors.
The company installed solar panels, and in its early years it benefited from a government incentive scheme.
However, it got into difficulties and went into liquidation.
The High Court heard that the directors considered making payments to themselves as salary, but were put off by the PAYE implications. Instead they were found to have made three unjustified credit entries against their directors' loan accounts.
The court ruled that removing this money from the company was a breach of their fiduciary duties. These duties included acting in the best interest of the creditors at the point when a company is "insolvent or of dubious solvency".
The directors were ordered to repay the money in full plus any interest accrued.
Please contact Sarah Liddiard if you would like more information about the issues raised in this article or any aspect of company law.