Q&As

Can a director (who is a sole director, the major shareholder and one of the company’s creditors) of an insolvent company decide to sell off the company’s assets to pay creditors of his own accord and outside of any insolvency process?

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Published on LexisPSL on 09/03/2017

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • Can a director (who is a sole director, the major shareholder and one of the company’s creditors) of an insolvent company decide to sell off the company’s assets to pay creditors of his own accord and outside of any insolvency process?
  • Duties of a company director–general
  • Directors’ insolvency duties

Can a director (who is a sole director, the major shareholder and one of the company’s creditors) of an insolvent company decide to sell off the company’s assets to pay creditors of his own accord and outside of any insolvency process?

Duties of a company director–general

All company directors have general duties, for example the duty under section 172 of the Companies Act 2006, to promote the success of the company. This duty requires a director to act in the way that they consider, in good faith, to be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, directors should have regard to the following matters (amongst others):

  1. the likely consequences of any decision in the long term

  2. the interests of the company's employees

  3. the need to foster the company's business relationships with suppliers, customers and others

  4. the impact of the company's operations on the community and the environment

  5. the desirability of the company maintaining a reputation for high standards of business conduct, and

  6. the need to act fairly as between members of the company

See Practice Note: Directors' duties—nature, scope, interpretation and application for more information on general duties.

However, where a company is insolvent, or is verging on

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