Bednash v Hearsey: CA 15 May 2001

Excessie Directors pay recoverable on insolvency

The liquidator sought permission to appeal against rejection of its claim for repayment of sums by a director who, he said, had been paid excessive amounts. The claim had een rejected because at th time of payments, the company had not been insolvent.
Held: The court approved the statement of law at first instance: ‘While a company is not actually insolvent and is continuing to trade, directors deciding what to pay themselves must strike a fair balance, taking into account the value of their services to the company, the position on creditors, the company’s overall state and the availability of funds to make the payments. Reasonable latitude must be allowed before the court will say that payments to directors are so irresponsible as to have constituted a breach of their fiduciary duties; and it would take exceptional circumstances before they would be expected (if they ever were) to suspend their own remuneration altogether.’


Potter LJ,Sir Martin Nourse


[2001] EWCA Civ 787




England and Wales

Company, Insolvency

Updated: 27 June 2022; Ref: scu.218150