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Breach of Duty and Misfeasance

Company directors have a legal duty to act for the benefit of their company rather than themselves. Knowing when this line has been crossed is not always straightforward and can lead to tough questions during an insolvency, as well as potential claims for breach of duty and misfeasance.

Any director who is facing claims of misfeasance or breach of directors’ duties during an insolvency would be wise to seek expert advice. It can also be sensible to seek such advice in the early stages of an insolvency if you have any concerns about your actions being scrutinised by an insolvency practitioner.

At Isadore Goldman, we have extensive experience supporting company directors facing claims for breach of duty and misfeasance during insolvency. We can swiftly assess your legal position, so you know exactly what the risks are. Where required, we can assist with answering any questions put to you and build a strong defence if a claim is brought.

Our expert legal team can support directors with matters including:

Breach of fiduciary duty claims
Misfeasance claims
Antecedent transaction claims
Overdrawn directors’ loan accounts
Illegal dividend claims

We can also assist with many other types of claims against directors during insolvency.

For immediate, practical advice about dealing with breach of directors’ duties and misfeasance claims, please speak to our expert team today. You can get in touch at one of our offices in Norwich, Portsmouth or London, or email info@isadoregoldman.com.

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Why choose Isadore Goldman for help with director misfeasance and breach of duty claims?

Independently recognised expertise

Our insolvency law expertise has been recognised by high-profile client guides including Chambers & Partners and the Legal 500.

Clear, practical advice

Insolvency can be a scary and confusing time. We cut through the uncertainty by giving transparent, honest advice about your situation and any potential risks you are facing. You can then choose how to proceed with confidence.

Early resolutions often achievable

In many cases, our team can resolve director breach of fiduciary duty and misfeasance in public office claims at an early stage by strategically collaborating with insolvency practitioners and other interested parties. This can save a lot of time, expense, stress and publicity.

Robust representation when needed

Where a favourable outcome cannot be negotiated, then we have the skills and experience to strongly represent our clients in formal legal proceedings. We will ensure your case is prepared immaculately and that you have the very best representation at all times.

Our director breach of duty and misfeasance expertise

Breach of fiduciary duty claims

We can advise company directors who are facing claims for breach of fiduciary duty in relation to an insolvency, including in the most complex and challenging circumstances. We can help to establish that no breach occurred or, where this is not possible, attempt to secure the minimum possible penalties.

Misfeasance claims

Our insolvency experts can assist with all types of misfeasance claims, including those related to transactions at an undervalue, preferential payments, concealing or removing assets, concerns about salary and failure to monitor the company’s financial situation.

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Common questions about misfeasance and breach of directors’ duties

What is a director’s duty to a company?

Company directors owe various statutory duties to their companies:

Acting within their powers as defined by the company’s constitution
Promoting the success of the company
Exercising their independent judgement
Exercising reasonable care, skill and diligence when carrying out their role
Disclosing potential conflicts of interest to fellow board members
Declaring gifts or benefits from third parties
Disclosing any direct or indirect interest in proposed or existing transactions or arrangements involving the company

While breach of directors’ duties claims are perhaps best known in relation to the duty to promote the success of the company, they can potentially be brought for breaching any of the duties listed above.

Are directors personally liable for breach of duty?

Yes, a company director can be held personally responsible if they are found to have breached one or more of their statutory duties.

What are the consequences of breach of directors’ duties?

A company director can face both civil and criminal action for a breach of duty, depending on the circumstances.

The company, its shareholders, its creditors and insolvency practitioners can all potentially make a claim against a director for breach of duty. Possible consequences of a successful claim include the director being required to:

Pay any personal profit they have made to the company in restitution for any losses the company experience due to the breach
Restore any company property wrongly taken by the director to the company
Pay damages to the company for any losses the company has experienced due to the breach of duty

The director could also be made subject to an injunctive relief, which can prevent them from breaching their duties or continuing to do so if a breach has already occurred.

The company may also be able to rescind any contract signed by the director in breach of their duties.

What is misfeasance under UK law?

Misfeasance is a specific type of claim against a company director who is accused of breaching their fiduciary duty i.e. their responsibility to act in the best interests of another party or parties, such as the company’s creditors.

A misfeasance claim against a director can arise in relation to various actions taken by that director, such as:

Incorrect preference in payments – where the director deliberately chooses to pay specific creditors without proper justification.
Transactions at an undervalue – where a director allows business assets to be sold at less than their true value.
Concealing or removing assets from the business – where a director attempts to hide company assets or remove them from the business to avoid them being sold as part of insolvency proceedings.
Taking an unjustifiably high salary – where the director’s salary is higher than the company can support.
Failure to properly monitor the company’s financial situation – where a director has not properly monitored the business’s finances and/or has not attempted appropriate action to manage any problems.

What are the consequences of misfeasance?

Following a successful misfeasance claim, a company director could be:

Required to restore assets to the company
Made to repay funds to the company
Held personally liable for the debts owed by the company
Disqualified from acting as a company director for between two to fifteen years

What is the difference between misfeasance, malfeasance and nonfeasance?

Misfeasance, malfeasance and nonfeasance are different issues that a company director could be accused of. Broadly, the three can be described as follows:

Misfeasance – Where a director has carried out a lawful act, but in a way that is inappropriate or they did not follow the correct procedure or the act was carried out in an unlawful manner.
Malfeasance – Where the director has carried out an unlawful act.
Nonfeasance – Where the director has failed to carry out an action or actions that they were required to carry out as part of their legal responsibilities, whether intentionally or unintentionally.