The liquidator appealed refusal of the court to make liable one director who had unknowingly allowed company funds to be loaned unlawfully to a co-director.
Held: The section imposed liability on one director for unlawful arrangements made by another. ‘If annual accounts are approved which do not comply with the requirements of the Act, every director of the company who is party to their approval and who knows that they do not comply or is reckless as to whether they comply is guilty of an offence; and, for that purpose, every director of the company at the time that the accounts are approved shall be taken to be a party to their approval unless he shows that he took all reasonable steps to prevent their being approved’. Where an arrangement or transaction is made by a company for a director of the company in contravention of section 330 of the Act, section 341(2)(b) imposes liability ‘to indemnify the company for any loss or damage resulting from the arrangement or transaction’ on any other director of the company ‘who authorised the arrangement or transaction’, and it is important, therefore, both in the context of sub-section (2) and in the context of sub-section (5), to identify the ‘arrangement or transaction’ which is said to be in contravention of section 330 of the Act.
Judges:
Chadwick LJ, Dyson LJ, Sir Martin Nourse
Citations:
[2006] EWCA Civ 943, Times 21-Jul-2006
Links:
Statutes:
Jurisdiction:
England and Wales
Company, Insolvency
Updated: 26 August 2022; Ref: scu.242977