Pinpointing the de facto director—Re Sports Management Group Ltd (in liquidation)

Pinpointing the de facto director—Re Sports Management Group Ltd (in liquidation)

What are the difficulties when identifying the de facto director after a company has gone into liquidation? Gemma Witherington, barrister at Hardwicke, explores the issues faced by Registrar Derrett when trying to determine the de facto director of Sports Management Group Ltd and highlights the lessons that can be learnt from the judgment.

Original news

Re Sports Management Group Ltd (in liquidation); Green (as liquidator of Sports Management Group Ltd) v Marston and another [2016] Lexis Citation 55, [2016] All ER (D) 208 (May)

The Companies Court held that, on the facts, the second respondent had been a de facto director of Sports Management Group Ltd (in liquidation). Accordingly, he had no defence to the liquidator’s claim in respect of various payments made when the company was insolvent and would not be granted relief for a director’s breach of duty.

Briefly, what were the facts of this case?

The company called Sports Management Group Limited (SMG) operated in a number of areas one of which was creating magazines for the sports industry. It was involved in providing sponsorship deals for individuals and large organisations, like Formula One teams. SMG went into liquidation and owed significant amounts of money to a range of creditors, including HMRC.

The liquidator appointed was Elliott Green, the applicant in this case. Considering the records of the company, he noted that Richard Marston was a de jure director of SMG. He alleged that Wayne Lochner was a de facto director. As the first respondent, Mr Marston accepted that he was a director of SMG. He claimed he was not a man of means and so early on he settled the claim against him. The case then proceeded against the second respondent, Wayne Lochner only. He was not listed as a director of the company at Companies House so a key question in the case was whether or not he was a de facto director of SMG when looking at all of the circumstances of the case.

What were the main legal arguments used by both parties and what was the decision

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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.