Misfeasance claims under section 212 of the Insolvency Act 1986
Misfeasance claims under section 212 of the Insolvency Act 1986

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Misfeasance claims under section 212 of the Insolvency Act 1986
  • What is a misfeasance claim under section 212 of the Insolvency Act 1986?
  • Who can commence a misfeasance claim under IA 1986, s 212 and against whom?
  • What needs to be established to bring a misfeasance claim under IA 1986, s 212?
  • How a misfeasance claim is brought and what needs to be set out in the application
  • Relief the court will typically grant on a successful misfeasance claim
  • Creditors and the reflective loss principle

What is a misfeasance claim under section 212 of the Insolvency Act 1986?

Claims commenced under section 212 of the Insolvency Act 1986 (IA 1986) are procedural claims against individuals caught by that section. IA 1986, s 212 itself (unlike wrongful and fraudulent trading claims brought under IA 1986, ss 213–214) does not create a separate cause of action, but merely provides an alternative IA 1986 procedure for existing causes of action against certain individuals.

For that reason, where the duties of the directors are governed by the law of another jurisdiction (notwithstanding that the insolvency process is conducted in England and Wales), it is that foreign law under which it is determined whether the directors are in breach of their duties. For an example of this, see O’Keefe and another v Caner and others, and News Analysis: Limitation period for breach of directors’ duties claims in overseas companies (O’Keefe v Caner).

Most commonly, claims under IA 1986, s 212 are commenced where company officers (or auditors) have breached the duties owed to the company or misapplied company property, but the procedure has a wide application to a variety of causes of action. Claims for relief under IA 1986, s 212 can be brought in conjunction with other claims for relief under the IA 1986.

When a company is solvent and has no financial concerns its directors are,

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