Bankrupts involved in the management of a company—a cautionary tale

Bankrupts involved in the management of a company—a cautionary tale

James Dawson, barrister at 3PB, considers the decision in Re C. & M.B. Holdings Ltd, where trustees in bankruptcy sought relief in relation to a company in which the bankrupt owned shares.

Original news

Re C. & M.B. Holdings Ltd; Hamilton and another (Joint Trustees in Bankruptcy of Charles Newell Brown) v Brown and another company [2016] EWHC 191 (Ch), [2016] All ER (D) 103 (Feb)

The Companies Court ruled that the trustees in the bankruptcy of the first respondent’s husband were entitled to present a petition to wind up a company in which he had shares because they were to be regarded as ‘a member’ of the company, for the purposes of section 74 of the Insolvency Act 1986 (IA 1986) and, therefore, as registered within the company’s register of members for the relevant period. On the balance of probability, the trustees had established unfair prejudice and grounds for winding up the company, subject to financial issues yet to be determined.

What was the background to the hearing?

Mr and Mrs Brown were equal shareholders in C. & MB. Holdings Ltd (C. & M.B.), and until Mr Brown was made bankrupt, joint directors but, as the court found, it was Mr Brown who was the experienced businessman and who ran C. & M.B. and its subsidiaries. Mr Brown was made bankrupt in May 2014, but continued to be concerned with C. & M.B.’s management after he was made bankrupt, in breach of section 11 of the Company Directors Disqualification Act 1986.

Mr Brown’s joint trustees in bankruptcy (trustees) petitioned the court, claiming relief under section 994 of the Companies Act 2006 (CA 2006) and to have the company wound up on the ground that it was just and equitable to do so pursuant to IA 1986, s 122(1)(g). They relied on the fact that Mr Brown had continued to be involved in

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.