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Paying the price

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14 February 2014 / Helen Mulcahy , Davina Bentley
Issue: 7594 / Categories: Features , Company , Commercial
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What is the liability of a director who pays debts while his company is insolvent? Helen Mulcahy & Davina Bentley report
Recently, the liquidators of HLC Environmental Projects Limited (HLC) issued a claim for misfeasance against the principal director of HLC, Mr Carvalho, pursuant to s 212 Insolvency Act 1986 (IA 1986). The liquidators claimed that Carvalho acted in breach of his duties as a director, both under common law and pursuant to ss 171(b) and 172 of the Companies Act 2006 (CA 2006) in relation to payments he caused HLC to make while it was insolvent.

 

Background

HLC carried on business in the waste recycling sector. In 1998, HLC became the preferred bidder to build recycling and energy centres in the UK. Two related companies, HLC Wrexham and HLC NPT, were set up and HLC was the holding company. By September 2005, administrators were appointed to HLC NPT and the HLC Wrexham project could not be completed.

Carvalho claimed that in 2008, HLC was still trading but the court

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