How to Defend a Misfeasance Claim
Call 0207 504 1300 now
Call 0207 504 1300 now to challenge Misfeasance claims and allegations
What is Misfeasance?
In accordance with section 212 of the Insolvency Act 1986, Misfeasance takes place when a director or ex-director has misapplied, misappropriated, retained or become accountable for any of the company's money or property.
Misfeasance is far worse than maladministration because it means a director has been dishonest and engaged in bad behaviour, wrongdoing, or some misconduct that's brought financial loss to creditors. Defending this type of claim can be stressful, and cost between £30,000 and £60,000 or more.
Although the director and company are recognised as separate legal entities; in many instances the director is also a company employee. Just like any other employee; they are supposed to put the company's interest above their own. Moreover, a director must always act with honesty and integrity, and add value to the company's assets.
Tips for Company Directors
Above all, never cave in to threats of Misfeasance proceedings in written correspondence from a liquidator, creditor, shareholder, or their lawyers. Only take these warnings seriously after court documents have been served because that's when things can get costly.
Misfeasance claims can be stressful and cost between £30,000 and £60,000, or even more to defend. In contrast and for a much smaller amount, I&L advises company directors on how to protect themselves against adverse proceedings.
A competent insolvency practitioner will chronicle the company's bank statements, and try to identify a pattern of preferential payments to connected suppliers and lenders the director is friendly with. Similarly, although the company would've collected National Insurance, VAT, and PAYE tax revenue in the months prior to insolvency; HM Revenue & Customs probably never received any of that money. As a result, any other creditor that received payments from the company during the same period would be deemed to have received preferential treatment, which is a Misfeasance.
Who can bring a Misfeasance claim?
In the vast majority of cases, the insolvency practitioner (liquidator) will claim for Misfeasance against the director of a liquidated company. The government's Insolvency Service, creditors, and shareholders can also take action. However, no claim can be made if the business has entered either Administration or a Company Voluntary Arrangement (CVA).
Misfeasance claims are complex and you will need expert guidance and support. I&L can advise how best to protect yourself against adverse proceedings. Call 020 7504 1300 now for free and confidential advice…