Director Misfeasance & Insolvency Claims
Advice for directors defending claims brought by liquidators, administrators and claims purchasers, and for office holders bringing them.
Enquire NowJonathan Lea Network advises directors defending claims brought by liquidators, administrators and claims purchasers, and acts for office holders bringing them. These claims cover misfeasance and breach of duty, wrongful trading, overdrawn director’s loan accounts, unlawful dividends, payments to connected parties and failures of record keeping. We act for claimants and defendants, though never on both sides of the same matter.
A liquidator’s letter is not a formality
It will not go away if you leave it, and what you say in your first substantive response will shape everything that follows.
Most directors who receive one reply from memory, at length, before anyone has looked at the documents. That is the single most damaging thing you can do, because the account you give will be tested against records you have not yet seen and cannot control.
We will tell you how strong the claim actually is before you spend money on it, and we will say plainly when the sensible answer is a negotiated settlement rather than a defence.
What gets claimed?
| Claim | What the office holder has to show |
|---|---|
| Misfeasance and breach of duty | That you breached a statutory or fiduciary duty and the company suffered loss as a result. This includes failing to have regard to creditors’ interests once insolvency became probable. |
| Wrongful trading | That you continued to trade after the point at which you knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation. |
| Overdrawn director’s loan account | That money was drawn and not repaid. These claims are often the simplest to prove and the hardest to resist. |
| Unlawful dividends | That dividends were paid without sufficient distributable reserves, which can make them recoverable from the recipient and from the directors who approved them. |
| Payments to connected parties | That value left the company for the benefit of a director, a family member or a connected business without proper justification. |
| Failure to keep accounting records | Usually pleaded alongside other claims, and frequently the reason the other claims are difficult to answer. |
How are these claims defended?
The strongest defences rest on documents that existed at the time. Forecasts, board minutes, correspondence with the bank, management accounts and the advice you took and what you did with it.
The weakest rest on what you remember about why you did something four years ago.
Reliance on professional advice helps only so far. A court can relieve a director who acted honestly and reasonably and who ought fairly to be excused, and it is much less likely to do so where the risk to the company should have been obvious and the director was the one who gained. In Manolete Partners Plc v Smith [2026] EWHC 1046 (Ch), an honest director who had relied on his solicitors was still held liable, precisely for those reasons.
Other points that frequently matter: the date of the conduct complained of against the limitation position, whether the loss claimed actually flows from the breach alleged, whether the company was in fact insolvent at the relevant time, and whether the office holder has the evidence to prove what is pleaded rather than simply to assert it.
What should you do if you have received a letter?
Get the company’s records first, including the bank statements, the accounting file and the board minutes. You are entitled to ask the office holder for documents you no longer hold.
Check whether you have insurance. Directors’ and officers’ cover may respond, and most policies require prompt notification.
Do not send a narrative account before someone has been through the documents with you.
Do not transfer or dispose of personal assets. This is the point at which doing so causes the most damage.
Take advice on the limitation position early. It is occasionally a complete answer and is frequently overlooked.
For office holders and assignees
We act for administrators, liquidators and claims purchasers bringing these claims. Our approach is set out on the Insolvency Practitioner Legal Services page: a fixed-fee initial review giving you a view on merits, quantum, realistic recovery and cost before the claim is worked up, and a settlement discipline applied at every stage.
How we can help
Send us the letter, the company’s records if you have them and a short chronology. We will give you a realistic assessment of the claim, the likely exposure and the options, including whether an early negotiated outcome is achievable.
FAQs: Director Misfeasance & Insolvency Claims
Claims of this kind are brought against directors personally and can follow long after the company has gone. A company can also be restored to the register for the purpose of bringing a claim. It helps, and it is rarely a complete answer on its own. Where the risk to the company should have been obvious, and where you were the person who benefited, reliance on advice has repeatedly failed to protect directors. Say so early and take advice on how to present it. Office holders make commercial decisions about recoverability, and a well-evidenced position on means often produces a settlement far below the sum claimed. Longer than most people expect. Limitation periods vary by claim type, and claims sold to specialist funders can surface several years after the company was wound up.
Do not reply from memory
Send us the letter before you respond to it. We will tell you how serious the claim is, what the documents are likely to show and what a realistic outcome looks like.
Contact Us
We provide most enquiries with an indicative scope of work and fee estimate, based on the information you share. We aim to respond within one working day.
In the same email, you will be invited to arrange a 20-minute complimentary, no-obligation video consultation, should the proposed scope of work and fee estimate be of interest. This initial discussion is designed to help us better understand your requirements, refine the scope of work and ensure our approach is fully aligned with your objectives.Following the call, we will email you a definitive, formal fee estimate for you to consider and approve.
Where you would prefer to receive initial advice and guidance from the outset, or where a short introductory call would not be the most appropriate starting point, we may instead recommend a 2.5-hour fixed-fee appointment, starting from £750 + VAT. This enables us to review the information you provide, discuss your situation with you and provide considered, tailored advice at an early stage.
To make an enquiry, please email us at wewillhelp@jonathanlea.net, complete our contact form, or call us on 01444 708640.
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