Legal News

Directors beware—how not to use your loan account (Re Saint George Investment Holdings Ltd)

Published on: 10 November 2020
Published by: LexisPSL
  • Directors beware—how not to use your loan account (Re Saint George Investment Holdings Ltd)
  • What are the practical implications of this case?
  • What was the background?
  • What did the court decide?
  • Case details

Article summary

Restructuring & Insolvency analysis: This case concerned the first hearing of an application for repayment of a substantially overdrawn director’s loan account (DLA) and various preference payments and transactions at an undervalue (TUVs). The court held that a DLA overdrawn as a result of significant and prolonged expenditure, unrelated to the benefit of the company, placed a former director in breach of his duty to act in a way most likely to promote its success. It was no answer that at the time the company had been sufficiently financially robust to absorb such spending. As well as providing a useful reminder of the duties owed by directors to a company generally and in relation to the DLA specifically the court also reiterated helpful guidance on when office-holder claims are suitable for summary disposal. Written by Ben Channer, barrister at 3 Hare Court. or take a trial to read the full analysis.

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