Corporate Law Update: 23 - 29 September 2023

This week:

Court imposes compensation order on disqualified director

The court has ordered a disqualified director of an insolvent company to pay personal compensation to creditors.

This is only the second time the courts have considered a personal compensation order against a disqualified director since their introduction in 2015.

Secretary of State v Barnsby [2023] EWHC 2284 (Ch) concerned an individual who was the sole director and majority shareholder of a company that sold package holidays. The individual directed the company to continue selling package holidays after its ATOL licence had expired, which was unlawful.

In April 2022, the court made an order against the individual under the Company Directors Disqualification Act 1986 (the CDDA), prohibiting him from acting as a director for seven years.

Subsequently, the Secretary of State applied for a compensation order under the CDDA to recoup deposits paid by five customers. The court granted the order.

Compensation orders and compensation undertakings were introduced in 2015 but have so far been little used. However, given the difficulties that liquidators and administrators now face in bringing successful wrongful trading claims against directors, they may start to become more common.

Read more about the court’s decision to make a compensation order in our separate in-depth article.