The recent case of Ruscoe Ltd (in liquidation), in which judgment was given on 7 August 2012 serves as a salutary warning to company directors of the dangers of overlooking the need for professional advice. The context of the case was one of the company buying back shares from a minority shareholder over time, but the lesson applies equally for other scenarios where legislation prescribes in great detail how company directors must act, including paying dividends on shares. As the director here failed to satisfy the Companies Act formalities, they were ordered to repay to the company over a quarter of a million pounds which it had paid the shareholder prior to the company going into liquidation. It was no excuse at all that the director had failed to take professional advice; if they had done, they would almost certainly have escaped this crippling personal liability.
For the creditors in the liquidation, on whose behalf the liquidator (Mark Fry of Begbies Traynor) brought the case, the judgment of course reflected a good result. Such claims offer a very important opportunity for creditors in insolvent situations to effect a realisation to mitigate their exposure.