acto director unless they voluntarily assume responsibility for a subsidiary company.[173] Similarly to be shadow director, according to Millett J in Re Hydrodam (Corby) Ltd[174] it is not e

Under the Insolvency Act 1986 section 212,[171] a liquidator or administrator can bring a claim for summary judgment in the company's name to vindicate any breach of duty by a director owed to the company. This means the directors' duties found in the Companies Act 2006 sections 171 to 177, and in particular a director's duty to act within her powers, her duty of care and duty to avoid any possibility of a conflict of interest. "Director" in this sense is given a broad scope and includes de jure directors, who are formally appointed, de facto directors who assume the role of a director without formal appointment, and shadow directors, under whose directors the official directors are accustomed to act.[172] The candidates for de facto or shadow directors are usually banks who become involved in company management to protect their lending, parent companies, or people who attempt to rescue a company (other than insolvency practitioners). In Re Paycheck Services 3 Ltd a majority of the Supreme Court held that acting as a director of a corporate director cannot make someone a de facto director unless they voluntarily assume responsibility for a subsidiary company.[173] Similarly to be shadow director, according to Millett J in Re Hydrodam (Corby) Ltd[174] it is not enough to simply be on the board of a parent company.

As an emphasis to the standard codified list of duties, and now reflected in the Companies Act 2006 section 172(4), at common law the duty of directors to pay regard to the interests of creditors increases as a company approaches an insolvent state. While ordinarily, a director's duty is to promote the company's success for the members' benefit,[175] in the vicinity of insolvency a director's actions affect the financial interests of the creditor body the greatest.[176]

Because the misfeasance provision reflects causes of action vested in the company, any money recovered under it is held so that it will go to pay off creditors in their ordinary order of priority. In Re Anglo-Austrian Printing & Publishing Union[177] this meant that a liquidator who had successfully sued directors for £7000 had to give up the funds to a group of debenture holders, who had not yet been paid in full, so there is no discretion to apply the assets in favour of unsecured creditors. A potential benefit is that because the causes of action are vested in the company, they may be assigned to third parties, who may prefer to take the risk and reward of pursuing litigation over the liquidator or administrator.[178] These features are the reverse for money recovered through the statutory based causes of action of fraudulent and wrongful trading.
Unlawful trading

interest. "Director" in this sense is given a broad scope and includes de jure directors, who are formally appointed, de facto directors who assume the role of a director without formal appointment, and sha

Director duty cases
See also: UK company law, Directors' duties in the United Kingdom, Directors' duties, Misfeasance, and CDDA 1986

Under the Insolvency Act 1986 section 212,[171] a liquidator or administrator can bring a claim for summary judgment in the company's name to vindicate any breach of duty by a director owed to the company. This means the directors' duties found in the Companies Act 2006 sections 171 to 177, and in particular a director's duty to act within her powers, her duty of care and duty to avoid any possibility of a conflict of interest. "Director" in this sense is given a broad scope and includes de jure directors, who are formally appointed, de facto directors who assume the role of a director without formal appointment, and shadow directors, under whose directors the official directors are accustomed to act.[172] The candidates for de facto or shadow directors are usually banks who become involved in company management to protect their lending, parent companies, or people who attempt to rescue a company (other than insolvency practitioners). In Re Paycheck Services 3 Ltd a majority of the Supreme Court held that acting as a director of a corporate director cannot make someone a de facto director unless they voluntarily assume responsibility for a subsidiary company.[173] Similarly to be shadow director, according to Millett J in Re Hydrodam (Corby) Ltd[174] it is not enough to simply be on the board of a parent company.

was far too long. This only rescinds the charge, and not the debt itself, which remains in effect as before but the creditor becomes unsecured.[166] Banks operating accounts for companies in overdraft hav

The Insolvency Act 1986 section 238 only catches depletion of a company's total assets, rather than simply preferring one creditor at the expense of others.[164] This happens through the creation of security interests, and they may also be unwound on three limited grounds. First, under section 245, any floating charge created up to one year before the onset of insolvency is avoidable at the company's instance if new money was not advanced to the company in return. So a company cannot grant a floating charge to a creditor to secure past advances made by that creditor, unless given at least "at the same time". In Re Shoe Lace Ltd[165] Hoffmann J held that £350,000 advanced in April and May was not close enough to a floating charge created in July to be considered "at the same time". The floating charge could not secure those amounts. Because the context of the legislation was a business one, and in view of the fact that floating charges can be registered up to 21 days after their creation, a few months was far too long. This only rescinds the charge, and not the debt itself, which remains in effect as before but the creditor becomes unsecured.[166] Banks operating accounts for companies in overdraft have an advantage in this respect. Re Yeovil Glove Co Ltd[167] held that if the overall level of debt remains the same, before and after a floating charge is created, and if money turns over by payments of the company in and withdrawals out, the bank's continued extension of credit will continually "harden" their floating charge. Although the Yeovil Glove company was always indebted to the bank before a floating charge was created, and was indebted at the point of insolvency, because it had deposited and withdrawn a greater amount, the bank's floating charge was considered secure.[168]

Apart from floating charges, a second and general ground for avoiding preferences is found under section 239. This avoids preferences that entail a "desire to prefer" one creditor over another. This test is hard to fulfil. In Re MC Bacon Ltd, a company gave a floating charge to Natwest bank in return for a continued overdraft as its business declined. Millett J held the company had not desired to prefer the bank. It had no special affection for its bank, and only agreed to the charge to prolong survival of the business.[169] By contrast, in Re Agriplant Services Ltd[170] Jonathan Parker J held it was an unlawful preference for Agriplant to pay £20,000 due on a leasing contract for earth moving equipment to a company. This was mainly because Agriplant's major shareholder Mr Sagar, had guaranteed that Agriplant's liability, and so repayment absolved Mr Sagar's liabilities above other creditors. Third and finally, CA 2006 section 874 stipulates that any charge, including a floating charge, that is not registered is considered void. This simple provision encourages a transparency of security interests, at least if creditors are in a position to check the register.
Directors' duties