INSOLVENCY AHEAD! A RECENT COURT CASE.
By Tim Corfield
The recent case of Hedger v Adams makes interesting reading for directors and Insolvency Practitioners (IP’s).
The director, Mr Adams, took advice about the financial state of his company and was advised by an IP that insolvency was inevitable for the company. Mr Adams had the company assets professionally valued and was advised that the open market value was around £52,000,including goodwill. The director proceeded to sell the assets to an associated company (of which he was also director) at a price based upon open market value. The consideration for the assets was completely deferred with the only security being retention of title. A liquidator was subsequently appointed who adopted this contract.
The issues were whether Mr Adams had breached his duties as he had failed to sell the assets for the best price, on a risky deferred consideration basis and had not sought approval of the shareholders regarding a substantial property transaction.
The court decided the director was NOT in breach of his duties. At all times he had considered, and documented, his actions in respect of the creditor’s interests. He had also acted to avoid costs and diminution of asset value caused by an open market sale. A major consideration was that he had sought advice, at all times.
Do you know a Mr Adams with an insolvent company? Maybe he’s not sure the company is insolvent. Please ask him to get in touch with me or Richard Owen at Griffin and King on 01922 722205 for a free, confidential chat – we will be able to help! In many cases a formal insolvency can be avoided – the sooner we get involved, the sooner we can help put a survival plan together.